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 Federal  Communications  Commission  FCC  06-  105 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 


 In  the  Matter  of 
 Applications  for  Consent  to  the  Assignment  and/  or  Transfer  of  Control  of  Licenses 


 Adelphia  Communications  Corporation,  (and  subsidiaries,  debtors-  in-  possession), 
 Assignors,  to 
 Time  Warner  Cable  Inc.  (subsidiaries),  Assignees; 


 Adelphia  Communications  Corporation,  (and  subsidiaries,  debtors-  in-  possession), 
 Assignors  and  Transferors,  to 
 Comcast  Corporation  (subsidiaries),  Assignees  and  Transferees; 


 Comcast  Corporation,  Transferor,  to 
 Time  Warner  Inc.,  Transferee; 
 Time  Warner  Inc.,  Transferor,  to 
 Comcast  Corporation,  Transferee 


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 MB  Docket  No.  05-  192 


 MEMORANDUM  OPINION  AND  ORDER 
 Adopted:  July  13,  2006  Released:  July  21,  2006 
 By  the  Commission:  Chairman  Martin,  and  Commissioners  Tate  and  McDowell  issuing  separate  statements;  Commissioner  Copps  dissenting  and  issuing  a  statement;  and  Commissioner  Adelstein 
 approving  in  part,  dissenting  in  part  and  issuing  a  statement. 
 TABLE  OF  CONTENTS 
 Heading  Paragraph  # 
 I.  INTRODUCTION..................................................................................................................................  1  II.  DESCRIPTION  OF  THE  PARTIES......................................................................................................  6 
 A.  Adelphia  Communications  Corporation  ..........................................................................................  6  B.  Comcast  Corporation  .......................................................................................................................  7 
 C.  Time  Warner  Inc.  .............................................................................................................................  9  D.  The  Proposed  Transactions  ............................................................................................................  11 
 E.  Application  and  Review  Process  ...................................................................................................  17  1.  Commission  Review................................................................................................................  17 
 2.  Federal  Trade  Commission  Review  ........................................................................................  21  III.  STANDARD  OF  REVIEW  AND  PUBLIC  INTEREST  FRAMEWORK..........................................  23 
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 IV.  APPLICABLE  REGULATORY  FRAMEWORK...............................................................................  33  A.  Cable  Ownership............................................................................................................................  34 
 B.  Program  Access  .............................................................................................................................  39  C.  Program  Carriage  ...........................................................................................................................  43 
 V.  COMPLIANCE  WITH  COMMISSION  RULES.................................................................................  44  A.  National  Cable  Ownership  Limit  ...................................................................................................  45 
 B.  Other  Cable  Ownership  Rules  .......................................................................................................  53  VI.  ANALYSIS  OF  POTENTIAL  HARMS  IN  THE  RELEVANT  MARKETS......................................  59 
 A.  Relevant  Markets  ...........................................................................................................................  59  1.  MVPD  Services.......................................................................................................................  61 
 a.  Product  Market  .................................................................................................................  61  b.  Geographic  Market  ...........................................................................................................  64 
 2.  Video  Programming  ................................................................................................................  65  a.  Product  Market  .................................................................................................................  65 
 b.  Geographic  Market  ...........................................................................................................  68  B.  Introduction  to  Potential  Harms.....................................................................................................  69 
 C.  Potential  Horizontal  Harms............................................................................................................  74  1.  MVPD  Market.........................................................................................................................  74 
 a.  Potential  Effects  on  MVPD  Competition  .........................................................................  75  b.  Potential  Effects  on  Cable  Rates.......................................................................................  84 
 c.  Potential  for  Increased  Opportunity  to  Engage  in  Anticompetitive  Practices  ..................  87  d.  Potential  Harms  to  Franchising  Process  ...........................................................................  92 
 2.  Video  Programming  Market....................................................................................................  97  a.  Nationally  Distributed  Programming..............................................................................  100 
 b.  Regional  Programming  ...................................................................................................  111  D.  Potential  Vertical  Harms..............................................................................................................  115 
 1.  Access  to  Affiliated  Programming  ........................................................................................  117  a.  Regional  Sports  Programming........................................................................................  122 
 (i)  Introduction  and  Analytical  Approach  .....................................................................  122  (ii)  Theories  of  Harm  .....................................................................................................  130 
 b.  National  and  Non-  Sports  Regional  Programming  ..........................................................  166  2.  Access  to  Unaffiliated  Programming/  Exclusive  Dealing......................................................  170 
 3.  Program  Carriage  Issues........................................................................................................  180  VII.  ANALYSIS  OF  OTHER  POTENTIAL  PUBLIC  INTEREST  HARMS.........................................  192 
 A.  Broadcast  Programming  Issues....................................................................................................  193  B.  Viewpoint  Diversity  and  First  Amendment  Issues  ......................................................................  198 
 C.  Deployment  of  Services  Based  on  Economic  Status  or  Race/  Ethnicity  ......................................  206  D.  Potential  Internet-  Related  Harms.................................................................................................  212 
 E.  Equipment  and  Interactive  Television  Issues...............................................................................  224  F.  Impact  on  Employment  Practices  ................................................................................................  228 
 G.  Character  Qualifications  ..............................................................................................................  232  VIII.  ANALYSIS  OF  PUBLIC  INTEREST  BENEFITS.....................................................................  241 
 A.  Analytical  Framework  .................................................................................................................  243  B.  Claimed  Benefits..........................................................................................................................  246 
 1.  Deployment  of  Advanced  Services  on  Adelphias  Systems  .................................................  246  2.  Clustering  of  Comcast  and  Time  Warner  Systems................................................................  264 
 3.  Resolution  of  Bankruptcy  Proceeding...................................................................................  278  4.  Unwinding  of  Comcasts  Interests  in  Time  Warner  Cable  and  Time  Warner 
 Entertainment,  L.  P.................................................................................................................  287  IX.  BALANCING  PUBLIC  INTEREST  HARMS  AND  BENEFITS.....................................................  294 
 X.  PROCEDURAL  MATTERS..............................................................................................................  301  A.  City  of  San  Buenaventura  Petition  to  Condition  Approval..........................................................  301 
 B.  Free  Press  Motion  to  Hold  in  Abeyance  ......................................................................................  307 
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 C.  TWE  and  Time  Warner  Cable  Redemption  Transactions............................................................  309  XI.  ORDERING  CLAUSES.....................................................................................................................  311 
 Appendix  A  -  Petitioners  and  Commenters  Appendix  B  -  Remedies  &  Conditions 
 Appendix  C  -  Modifications  to  Rules  for  Arbitration  Appendix  D  -  Economic  Appendix 
 Appendix  E  -  Licenses  and  Authorizations  to  Be  Transferred 
 I.  INTRODUCTION 
 1.  In  this  Order,  we  consider  the  applications  (  Applications)  1  of  Adelphia  Communications  Corporation  and  subsidiaries,  debtors-  in-  possession  (  Adelphia),  Time  Warner  Inc.  (  Time  Warner), 


 Time  Warner  Cable  Inc.  (  Time  Warner  Cable),  2  and  Comcast  Corporation  (  Comcast)  for  consent  to  the  acquisition  by  Time  Warner  Cable  and  Comcast  of  substantially  all  of  the  domestic  cable  systems 
 owned  or  managed  by  Adelphia.  3  The  Applications  are  filed  pursuant  to  sections  214  and  310(  d)  of  the  Communications  Act  of  1934,  as  amended  (  Communications  Act  or  Act),  4  and  seek  Commission 
 consent  to  a  number  of  license  transfers  related  to  a  series  of  separate  transactions  5  that  would  result  in  (1) 


 1  Applications  for  Consent  to  the  Assignment  and/  or  Transfer  of  Control  of  Licenses,  Adelphia  Communications 
 Corporation,  Assignors,  to  Time  Warner  Cable  Inc.,  Assignees;  Adelphia  Communications  Corporation,  Assignors  and  Transferors,  to  Comcast  Corporation,  Assignees  and  Transferees;  Comcast  Corporation,  Transferor,  to  Time 


 Warner  Inc.,  Transferee;  Time  Warner  Inc.,  Transferor,  to  Comcast  Corporation,  Transferee,  Applications  and  Public  Interest  Statement  (May  18,  2005)  (  Public  Interest  Statement).  The  term  Applications  refers  to  the 
 Public  Interest  Statement,  associated  exhibits,  and  the  letter  from  Arthur  H.  Harding,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (June  3,  2005)  (additional  agreements  relating 
 to  the  underlying  transactions).  In  addition,  the  Applicants  filed  amended  asset  purchase  agreements  pursuant  to  Adelphias  Second  Modified  Fourth  Amended  Plan  of  Reorganization.  See  Letter  from  Angie  Kronenberg,  Willkie, 
 Farr  &  Gallagher  LLP,  Counsel  for  Adelphia  Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (June  8,  2006).  The  Media  Bureau  placed  the  Applications  on  public  notice  on  June  2,  2005,  DA  05-  1591,  MB  Docket  No. 
 05-  192,  establishing  a  comment  cycle  for  this  proceeding.  See  Appendix  A  for  a  list  of  commenters  and  petitioners  filing  in  this  proceeding  and  the  abbreviations  by  which  they  are  identified  in  this  Order.  As  discussed  more  fully  at 
 para.  16,  infra,  the  Applications  involve  assignment  of  licenses,  transfers  of  control,  and  pro  forma  assignment  of  licenses.  For  convenience,  we  will  refer  to  the  overall  filings  as  transfers. 


 2  As  used  throughout  this  Order,  the  term  Time  Warner  will  refer  generally  to  both  Time  Warner  Inc.  and  its 
 subsidiary,  Time  Warner  Cable.  3 
 Public  Interest  Statement  at  2.  The  so-  called  Rigas  Family  systems  in  the  following  communities  are  not  subject  to  the  transactions  Township  of  Roulette,  Township  of  Liberty,  Township  of  Annin,  Township  of  Portgage, 


 Township  of  Shippen  and  Township  of  Lumber,  all  in  Pennsylvania;  Borough  of  Coudersport,  Borough  of  Port  Allegany  and  Borough  of  Emporium,  all  in  Pennsylvania;  and  the  County  of  Louisa,  Virginia.  See  Adelphia  Dec. 
 12,  2005  Response  to  Information  Requests  II.  A.  1,  3,  7,  8  and  9.  In  addition,  Adelphia  stated  that  its  systems  in  St.  Marys,  Pennsylvania  and  Puerto  Rico  are  not  part  of  the  transactions.  Adelphia  Dec.  12,  2005  Response  to 
 Information  Request  II.  A.  2;  see  also  Public  Interest  Statement  at  6  n.  12.  In  a  filing  with  the  federal  bankruptcy  court,  Adelphia  represented  that  its  50%  interest  in  a  joint  venture  in  Puerto  Rico  was  sold  on  October  31,  2005.  See 
 Debtors  Fourth  Amended  Disclosure  Statement  Pursuant  to  Section  1125  of  the  Bankruptcy  Code,  U.  S.  Bankruptcy  Court  Southern  District  of  New  York,  Case  No.  02-  41729,  filed  Nov.  21,  2005,  at  60,  436.  (  Fourth  Amended 
 Disclosure  Statement).  See  Adelphia  Dec.  12,  2005  Response  to  Information  Request  for  a  listing  of  the  Adelphia  cable  systems  involved  in  the  Applications. 


 4  47  U.  S.  C.    214,  310(  d). 
 5  The  Applicants  state  that  each  of  the  Adelphia  Transactions,  as  described  more  fully  below,  is  conditioned  on 
 contemporaneous  consummation  of  the  other.  See  Public  Interest  Statement  at  3.  The  Applicants  add  that  the  Adelphia  Transactions  are  not  dependent  on  the  occurrence  of  the  system  swaps  and  redemption  transactions 


 between  Time  Warner  and  Comcast.  Id.  The  transactions  are  described  fully  at  paras.  11-  16,  infra. 
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 the  sale  of  certain  cable  systems  and  assets  of  Adelphia  to  subsidiaries  or  affiliates  of  Time  Warner;  (2)  the  sale  of  certain  cable  systems  and  assets  of  Adelphia  to  subsidiaries  or  affiliates  of  Comcast;  (3)  the 
 exchange  of  certain  cable  systems  and  assets  between  affiliates  or  subsidiaries  of  Time  Warner  and  Comcast;  and  (4)  the  redemption  of  Comcasts  interests  in  Time  Warner  Cable  and  Time  Warner 
 Entertainment  Company,  L.  P.  (  TWE).  6  As  discussed  more  fully  below,  the  Applicants  assert  that  approval  of  the  Applications  would  result  in  a  number  of  public  interest  benefits,  would  not  create  any 
 anticompetitive  effects,  and  would  be  fully  consistent  with  Commission  rules  and  policies,  including  the  Commissions  remanded  cable  horizontal  and  vertical  ownership  limits. 


 2.  According  to  the  Applicants,  Comcast  would  serve  approximately  26.8  million  subscribers,  or  28.9%  of  all  U.  S.  multichannel  video  programming  distribution  (  MVPD)  subscribers  as  a  result  of 
 the  transactions.  This  would  represent  a  net  gain  of  approximately  680,000  subscribers,  or  0.73%  of  U.  S.  MVPD  subscribers,  over  Comcasts  pre-  transaction  reach  of  26.1  million  subscribers,  or  28.2%  of  U.  S. 
 MVPD  subscribers.  Time  Warner  would  serve  approximately  16.6  million  subscribers  post-  transaction,  or  17.9%  of  U.  S.  MVPD  subscribers,  representing  a  gain  of  approximately  3.5  million  subscribers  over  its 
 pre-  transaction  total  of  13.1  million  subscribers.  Comcast  would  have  more  consolidated  franchised  operations  in  Southern  Florida,  including  West  Palm  Beach;  Minnesota;  New  England,  including  Boston; 
 Pennsylvania,  including  Philadelphia  and  Pittsburgh;  and  the  mid-  Atlantic  region  of  Washington,  D.  C.,  Maryland  and  Virginia.  7  Time  Warner  Cable  would  further  consolidate  its  operations  in  Southern 
 California,  including  Los  Angeles;  Maine;  Western  New  York;  North  Carolina;  Ohio,  including  Cincinnati,  Cleveland,  and  Columbus;  South  Carolina;  and  Texas,  including  Dallas.  8  As  part  of  the 
 initial  phase  of  this  transaction,  Time  Warner  and  Comcast  separately  would  acquire  Adelphias  cable  assets,  primarily  consisting  of  cable  systems  serving  approximately  five  million  subscribers,  for  $12.7 
 billion  in  cash.  Comcast  would  pay  approximately  $3.5  billion  in  cash.  Time  Warner  would  pay  approximately  $9.2  billion  in  cash.  In  addition,  Time  Warner  Cable  would  issue  publicly  traded 
 securities,  approximately  16%  of  which  would  be  issued  to  Adelphia  stakeholders,  with  the  remaining  84%  to  be  held  by  Time  Warner.  9 


 3.  The  Applicants  state  that  the  transactions  would  generate  substantial  public  interest  benefits  that  are  not  otherwise  achievable.  10  Specifically,  the  claimed  benefits  include  (1)  accelerated  deployment 
 of  advanced  services  (e.  g.,  high  definition  television  (  HDTV),  high-  speed  data,  video  on  demand  (  VOD),  digital  video  recorders,  and  telephony)  to  customers  currently  served  by  Adelphia;  (2) 
 enhanced  geographic  rationalization  (or  clustering)  resulting  both  from  the  acquisition  of  Adelphias  systems  and  the  system  swaps  between  Comcast  and  Time  Warner  Cable,  which  would  produce  cost-saving 
 operational,  infrastructure,  and  marketing  efficiencies;  (3)  Adelphias  emergence  from  bankruptcy  and  settlement  of  creditor  claims;  and  (4)  dissolution  of  Comcasts  interests  in  TWE  and  Time  Warner 
 Cable  consistent  with  the  Commissions  divestiture  order.  11  The  Applicants  further  state  that  the  improved  regional  coverage  of  each  companys  cable  operations  would  provide  the  scale  and  scope 


 6  Pursuant  to  the  terms  of  the  Commissions  decision  regarding  the  Comcast-  AT&  T  transaction,  Comcast  must 
 divest  its  17.  9%  equity  interest  in  Time  Warner  Cable  and  its  4.  7%  limited  partnership  interest  in  TWE.  Both  interests  are  currently  held  in  a  Commission-  mandated  trust.  Applications  for  Consent  to  the  Transfer  of  Control  of 


 Licenses  from  Comcast  Corporation  and  AT&  T  Corp.,  Transferors,  to  AT&  T  Comcast  Corporation,  Transferee,  17  FCC  Rcd  23246,  23274-  75    74-  77  (2002)  (  Comcast-  AT&  T  Order).  See  infra  paras.  13-  14  for  a  discussion  of 
 the  proposed  divestiture  of  the  TWC  and  TWE  Interests.  7 
 Public  Interest  Statement  at  5-  6  and  Ex.  R  (Map  and  Chart  of  Comcast  Post-  Transactions  Service  Areas).  8 
 Id.  at  5-  6  and  Ex.  Q  (Map  of  Time  Warner  Post-  Transactions  Service  Areas).  9 
 See  infra  paras.  11-  16  for  a  full  discussion  of  various  phases  of  the  transactions.  10 
 Public  Interest  Statement  at  i-  iv.  11 
 See  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23274-  75    74-  77. 
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 necessary  for  them  to  compete  more  effectively  with  the  substantially  larger  service  footprints  of  direct  broadcast  satellite  (  DBS)  providers  and  incumbent  local  exchange  carriers  (  incumbent  LECs).  12  The 
 Applicants  assert  that  the  public  interest  benefits  resulting  from  the  transactions  are  not  otherwise  obtainable  because  no  other  potential  cable  system  operator  can  offer  the  efficiencies  that  Time  Warner 
 Cable  and  Comcast,  based  on  the  location  of  their  current  cable  systems,  are  uniquely  able  to  bring  to  the  Adelphia  properties  through  regionalized  management  and  operation.  13  According  to  the  Applicants, 
 while  other  potential  purchasers  of  the  Adelphia  assets  might  bring  a  measure  of  improved  performance  and  innovation  to  the  systems,  only  Comcast  and  Time  Warner  Cable  have  the  combination  of 
 capabilities,  geographic  correlation  to  Adelphias  systems,  and  proven  track  record  necessary  to  maximize  such  benefits.  The  Applicants  assert  that,  like  the  acquisition  of  the  Adelphia  systems,  the  swaps  of 
 systems  between  Time  Warner  Cable  and  Comcast  will  lead  to  greater  geographic  rationalization  of  the  Applicants  cable  systems,  which  they  assert  will  provide  various  public  interest  benefits.  14 


 4.  To  obtain  Commission  approval,  the  Applicants  must  demonstrate  that  the  proposed  transactions  will  serve  the  public  interest,  convenience,  and  necessity  pursuant  to  sections  214  and  310(  d) 
 of  the  Communications  Act.  15  The  Commissions  review  of  the  applications  includes  an  assessment  of  whether  the  proposed  transactions  comply  with  specific  provisions  of  the  Communications  Act,  other 
 statutes,  and  the  Commissions  rules.  16  If  the  transactions  would  not  violate  a  statute  or  rule,  the  Commission  next  considers  whether  the  transactions  could  result  in  public  interest  harms  by  substantially 
 frustrating  or  impairing  the  objectives  or  implementation  of  the  Communications  Act  or  related  statutes.  17  The  Commission  generally  weighs  any  potential  public  interest  harms  of  proposed  transactions  against 
 any  potential  public  interest  benefits.  18  Applicants  have  the  burden  of  proving,  by  a  preponderance  of  the  evidence,  that  the  proposed  transactions,  on  balance,  serve  the  public  interest. 


 5.  Based  on  the  record  before  us,  and  as  discussed  more  fully  below,  we  find  that  the  grant  of  the  Applications,  as  conditioned,  serves  the  public  interest.  First,  we  find  that  the  proposed  transactions 
 will  comply  with  all  applicable  statutes  and  Commission  rules.  Second,  we  find  that  the  potential  public  interest  harms  of  the  proposed  transactions,  as  conditioned,  are  outweighed  by  the  potential  public  interest 
 benefits.  In  regard  to  the  potential  harms,  we  find  that  the  proposed  transactions  may  increase  the  likelihood  of  harm  in  markets  in  which  Comcast  or  Time  Warner  have,  or  may  have  in  the  future,  an 
 ownership  interest  in  Regional  Sports  Networks  (  RSNs).  The  transactions  may  also  trigger  harms  in  the  carriage  of  unaffiliated  programming.  Therefore,  we  impose  remedial  conditions  to  address  our 
 concerns.  We  do  not  find  that  the  transactions  will  lead  to  any  other  public  interest  harms.  We  also  find  that  the  transactions  likely  will  result  in  certain  public  interest  benefits.  More  specifically,  we  find  that 
 the  transactions  are  likely  to  accelerate  deployment  of  Voice  over  Internet  Protocol  (  VoIP)  service  and  advanced  video  services,  such  as  local  VOD  programming,  in  Adelphia  markets,  and  facilitate  the 


 12  Public  Interest  Statement  at  21-  40,  45-  60. 
 13  Id.  at  68. 
 14  Id.  at  ii-  iii;  see  infra  Section  VIII  (discussing  claimed  benefits). 
 15  See  47  U.  S.  C.    214,  310(  d);  see  also  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and 
 Section  214  Authorizations  from  MediaOne  Group,  Inc.,  Transferor,  to  AT&  T  Corp.,  Transferee,  15  FCC  Rcd  9816,  9817    1  (2000)  (  AT&  T-  MediaOne  Order);  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and 


 Section  214  Authorizations  from  Tele-  Communications,  Inc.,  Transferor,  to  AT&  T  Corp.,  Transferee,  14  FCC  Rcd  3160,  3168    13  (1999)  (  AT&  T-  TCI  Order). 


 16  See  General  Motors  Corporation  and  Hughes  Electronics  Corporation,  Transferors,  and  The  News  Corporation 
 Limited,  Transferee,  19  FCC  Rcd  473,  484    16  (2004)  (  News  Corp.-  Hughes  Order).  17 
 See  infra  paras.  23-  24  for  a  complete  discussion  of  the  Commissions  standard  of  review  analysis.  18 
 News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  477    5. 
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 resolution  of  the  bankruptcy  proceeding.  Therefore,  we  find  that  on  balance  the  public  interest  will  be  served  by  approval  of  the  Applications  subject  to  the  conditions  we  impose  herein. 
 II.  DESCRIPTION  OF  THE  PARTIES 
 A.  Adelphia  Communications  Corporation 
 6.  Adelphia  is  the  fifth  largest  multiple  cable  system  operator  (  MSO)  in  the  United  States  and  the  seventh  largest  MVPD.  Adelphia  provides  cable  television  service  to  approximately  five  million 


 subscribers.  19  In  addition  to  analog  and  digital  video  services,  it  offers  high-  speed  Internet  and  other  advanced  services,  including  digital  video,  VOD  programming,  and  digital  video  recorder  (  DVR) 
 services,  over  Adelphias  broadband  networks,  primarily  to  residential  customers  in  31  states,  with  significant  operations  in  and  around  Los  Angeles,  western  Pennsylvania,  Ohio,  western  New  York,  New 
 England,  southeast  Florida,  Virginia,  and  Colorado  Springs.  Adelphia  does  not  own  active  programming  services  20  nor  does  it  offer  local  telephone  service  to  the  public.  21  In  June  2002,  Adelphia  and 
 substantially  all  of  its  domestic  subsidiaries  filed  voluntary  petitions  under  Chapter  11  of  the  U.  S.  Bankruptcy  Code  for  relief  to  reorganize  as  an  independent  entity.  22  Adelphias  board  of  directors 
 approved  the  reorganization  plan,  and  bidding  for  the  companys  assets  ensued.  In  April  2005,  Adelphia  received  supplemental  bid  protections  from  the  U.  S.  Bankruptcy  Court  for  the  Southern  District  of  New 
 York  regarding  the  sale  of  certain  of  its  assets  to  Time  Warner  Cable  and  Comcast.  23 
 B.  Comcast  Corporation 
 7.  Comcast  is  the  nations  largest  MVPD  and  would  remain  so  upon  completion  of  the  transactions.  Applicants  state  that,  as  of  May  18,  2005,  Comcast  served  approximately  26.1  million 


 19  Adelphias  subscriber  count  includes  subscribers  served  by  several  joint  ventures  with  Comcast,  specifically,  the 
 Century-  TCI  Joint  Venture  and  the  Parnassos  Joint  Ventures.  Comcast  will  acquire  all  of  Adelphias  interests  in  the  Century-  TCI  and  Parnassos  partnerships,  including  approximately  one  million  subscribers  and  thereafter  will 


 transfer  these  assets  and  subscribers  to  Time  Warner.  In  addition,  Adelphia  holds  a  50%  interest  (with  the  remaining  50%  held  by  Ibis  Communication  Company)  in  the  Palm  Beach  Group  Cable  Joint  Venture,  which  serves 
 825  subscribers.  Adelphias  50%  interest  in  the  Palm  Beach  Group  Cable  Joint  Venture  will  be  assigned  to  Comcast,  with  Comcast  managing  the  day-  to-  day  operations  upon  consummation  of  the  transactions.  See  Public 
 Interest  Statement  at  6-  7,  73-  75;  see  also  Adelphia  Dec.  12,  2005  Response  to  Information  Request  II.  A.  6.  At  the  time  the  Applications  were  filed,  Adelphia  also  served  subscribers  through  three  joint  ventures  with  Tele-  Media 
 Corporation  of  Delaware,  in  which  it  was  the  majority  partner  (the  Tele-  Media  Joint  Ventures).  Separately  from  the  instant  transactions,  Adelphia  entered  into  an  agreement  to  purchase  the  minority  equity  interests  in  each  of  the 
 Tele-  Media  Joint  Ventures.  Public  Interest  Statement  at  6-  7.  On  May  26,  2005,  Adelphia  acquired  100%  ownership  of  the  Tele-  Media  Ventures.  See  Fourth  Amended  Disclosure  Statement  at  435. 


 20  Adelphia  owns  the  Empire  Sports  Network,  an  inactive  regional  sports  network,  but  it  is  excluded  from  the 
 transactions.  Adelphias  residential  and  commercial  security  monitoring  operations  in  Maine  and  its  long  distance  telephone  resale  business  are  also  excluded  from  the  transactions.  Public  Interest  Statement  at  7. 


 21  Adelphia  began  offering  VoIP  telephone  service  on  a  trial  basis  in  January  2005.  Trial  participants  were  limited 
 to  Adelphia  employees  in  the  Colorado  Springs,  Colorado  area.  Adelphia  suspended  its  VoIP  trial  on  October  11,  2005,  and  no  longer  provides  VoIP  service  to  any  customers,  including  Adelphia  employees.  See  Adelphia  Dec.  22, 


 2005  Response  to  Information  Request  IV.  E.  22 
 11  U.  S.  C.    1101  et  seq.  23 
 Public  Interest  Statement  at  8  (citing  In  re  Adelphia  Communications  Corp.,  et  al.,  Motion  for  Supplemental  Order,  Pursuant  to  Sections  105,  363,  364,  503,  507  and  1123  of  the  Bankruptcy  Code,  Approving  Supplemental 


 Bid  Protections  in  Connection  With  the  Sale  of  Substantially  All  of  the  Assets  of  Adelphia  Communications  Corporation  and  Certain  of  its  Affiliates,  Case  No.  02-  41729  (Bankr.  S.  D.  N.  Y.,  filed  Apr.  8,  2005)  at  5-  6).  The 
 bankruptcy  court  granted  the  Applicants  motion.  In  re  Adelphia  Communications  Corp.  et  al.,  Supplemental  Order,  Case  No.  02-  41729  (Bankr.  S.  D.  N.  Y.  Apr.  21,  2005)  (Gerber,  J.). 
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 subscribers  in  35  states  and  the  District  of  Columbia,  or  28.2%  of  MVPD  subscribers  nationwide.  24  Of  these,  approximately  21.5  million  were  served  as  of  that  date  by  Comcasts  wholly  owned  cable  systems, 
 and  approximately  4.6  million  were  served  by  systems  owned  jointly  by  Comcast  and  other  cable  operators.  25  Comcast  states  that  upon  completion  of  the  transactions,  it  will  serve  approximately  26.8 
 million  cable  subscribers,  or  28.9%  of  MVPD  subscribers.  26  Approximately  23.3  million  of  these  subscribers  will  be  served  by  wholly  owned  systems,  and  3.5  million  will  be  served  by  systems  owned 
 jointly  with  others.  27  Although  Comcast  expects  to  add  approximately  1.8  million  subscribers  served  by  wholly  owned  systems  through  the  transactions,  its  total  number  of  subscribers  served  through  jointly 
 owned  systems  will  decrease  by  approximately  1.1  million,  for  a  net  increase  of  680,000  attributable  subscribers,  or  0.73%  of  U.  S.  MVPD  subscribers.  28  As  a  result  of  the  acquisition  of  Adelphia  systems 
 and  the  cable  system  swaps  with  Time  Warner,  Comcast  will  consolidate  its  regional  footprints  in  Pennsylvania;  Minnesota;  Southern  Florida;  the  mid-  Atlantic  region  of  Washington,  D.  C.,  Maryland,  and 
 Virginia;  and  New  England. 
 8.  In  addition  to  basic  cable  service,  Comcast  offers  premium  movie  channels,  pay-  per-  view  (  PPV)  services,  HDTV,  VOD  programming,  DVR  services,  and  interactive  programming  guides. 


 Comcast  provides  facilities-  based  residential  local  telephone  service  to  approximately  1.225  million  customers.  29  Comcasts  VoIP  service,  Comcast  Digital  Voice,  is  currently  available  to  approximately 
 19  million  households  in  30  markets.  30  Comcast  owns  attributable  interests  in  nine  national  video  programming  networks,  31  eight  regional  sports  networks  (  RSNs),  32  three  team-  specific  networks,  33  and 


 24  Public  Interest  Statement  at  73.  The  Applicants  estimate  in  their  Public  Interest  Statement  that  there  are  92.6 
 million  MVPD  subscribers  nationwide.  Id.  at  73  n.  185  (citing  Kagan  Media  Money,  Apr.  26,  2005,  at  7).  25 
 These  include  systems  owned  jointly  with  Time  Warner  Cable,  which  together  served  approximately  1.5  million  subscribers  when  the  Applications  were  filed,  as  well  as  systems  owned  jointly  with  Adelphia,  which  served 


 approximately  one  million  subscribers  as  of  that  date.  Applicants  Reply  at  Ex.  F.  26 
 Public  Interest  Statement  at  73-  75.  27 
 Id.  at  74  n.  187.  28 
 Id.  at  75.  29 
 Id.  at  15.  30 
 Letter  from  Martha  Heller,  Wiley,  Rein  &  Fielding,  LLP,  Counsel  for  Comcast  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  29,  2006)  (  Comcast  Mar.  29,  2006  Ex  Parte)  at  2.  By  the  end  of  2005,  the  service  was 


 available  to  16  million  homes.  Id.  In  the  Public  Interest  Statement,  Comcast  stated  that  by  the  end  of  2005  the  service  would  be  available  to  over  15  million  homes,  with  full  deployment  to  over  40  million  homes  passed  targeted 
 for  2006.  Public  Interest  Statement  at  15.  Comcast  Business  Communications  (  CBC),  a  wholly  owned  subsidiary,  offers  integrated  broadband  communications  services  to  business  and  governmental  customers,  as  well  as  to  schools 
 and  libraries.  CBC  also  provides  local  exchange  service  to  small  and  medium-  sized  business  customers.  Comcasts  cable  telephony  and  CBCs  business  offerings  include  long  distance  service,  provided  mostly  on  a  resale  basis. 
 Public  Interest  Statement  at  15.  31 
 These  networks  include  (1)  E!  Entertainment  (60.  5%  interest);  (2)  The  Golf  Channel  (99.9%  interest);  (3)  The  Outdoor  Life  Network  (100%  interest);  (4)  The  Style  Network  (60.  5%  interest);  (5)  G4  Network  (83.  5%  interest); 


 (6)  TV  One  (32.8%  interest);  (7)  AZN  Television  (100%  interest);  (8)  iN  DEMAND  (54.1%  interest);  and  (9)  iN  DEMAND2  (54.1%  interest).  Public  Interest  Statement  at  15-  16;  see  also  Annual  Assessment  of  the  Status  of 
 Competition  in  the  Market  for  the  Delivery  of  Video  Programming,  21  FCC  Rcd  2503,  2622-  25  App.  C,  Table  C-  1  (2006)  (  Twelfth  Annual  Video  Competition  Report). 


 32  Comcasts  RSNs  include  (1)  Comcast  SportsNet  Philadelphia  (84.1%  interest),  offered  in  Pennsylvania, 
 Delaware,  and  southern  New  Jersey,  which  carries,  among  other  programming,  the  games  of  the  Philadelphia  Flyers  and  76ers;  (2)  Comcast  SportsNet  Mid-  Atlantic  (100%  interest)  offered  in  Maryland,  Virginia,  Delaware,  the 


 District  of  Columbia,  and  parts  of  Pennsylvania  and  West  Virginia,  which  carries  the  games  of  the  Baltimore  Orioles,  the  Washington  Wizards,  and  the  Washington  Capitals,  as  well  as  a  variety  of  college  sports; 
 (continued.) 
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 various  other  regional  and  local  video  programming  networks.  34  Comcast  holds  a  54%  interest  in  the  iN  DEMAND  Networks,  which  provides  high  definition  content,  including  VOD  and  PPV  services,  and  a 
 joint  venture  interest  in  PBS  Kids  Sprout,  a  new  VOD  service  for  preschool  children  that  launched  as  a  network  in  fall  2005.  35 


 C.  Time  Warner  Inc. 
 9.  Applicants  state  that  as  of  May  18,  2005,  Time  Warner  Cable  owned  or  managed  cable  systems  serving  13.1  million  subscribers  in  27  states,  making  it  the  nations  second  largest  cable  MSO 


 and  third  largest  MVPD.  36  As  a  result  of  the  transactions,  it  would  add  3.5  million  basic  video  subscribers  and  would  own  systems  serving  16.6  million  basic  subscribers  nationally,  or  17.9%  of  MVPD 
 subscribers.  37  Thus,  Time  Warner  Cable  expects  to  emerge  as  the  second  largest  MVPD  in  the  United 
 (Continued  from  previous  page)  (3)  Comcast/  Charter  Sports  Southeast  (70%  interest),  carried  in  Alabama,  Arkansas  (Little  Rock  area  only),  Florida, 
 Georgia,  Kentucky  (Louisville,  Lexington,  south-  central,  Paducah  and  western),  Louisiana,  Mississippi,  North  Carolina  (Asheville-  Hickory  area  only),  South  Carolina  (Greenville-  Spartanburg  area,  Camden,  and  coastal  South 
 Carolina  between  Charleston  and  Port  Royal),  Tennessee,  Virginia,  and  West  Virginia,  which  provides  a  mix  of  live  sports  programming  and  sports  news  and  analysis  with  a  focus  on  intercollegiate  sports;  (4)  Comcast  SportsNet 
 Chicago  (30%  interest),  offered  in  Iowa,  most  of  Illinois  and  Indiana,  and  parts  of  southern  Wisconsin,  which  carries  game  coverage  of  the  Chicago  Bulls,  Blackhawks,  Cubs,  and  White  Sox;  (5)  Comcast  SportsNet  West  (100% 
 interest),  offered  in  parts  of  California,  Oregon,  and  Nevada,  which  carries  games  of  the  Sacramento  Kings  and  the  WNBA  Sacramento  Monarchs,  as  well  as  Fresno  State  football,  Sacramento  State  football,  UC  Davis  football  and 
 basketball,  and  other  local  and  regional  sports  programming;  and  (6)  Comcast  Local  Detroit  (100%  interest),  offered  in  Michigan,  Illinois  and  Indiana,  which  carries  local  content  including  coverage  of  high  school  games,  the  Mid-American 
 Conference,  Michigan  and  Michigan  State  mens  basketball  games,  and  some  Detroit  Shock  (WNBA)  games.  Public  Interest  Statement  at  17-  18,  Ex.  AA;  see  also  www.  comcastlocal.  com/  channels.  asp/  (visited  June  16, 
 2006).  Comcast  also  holds  a  50%  ownership  interest  in  Fox  Sports  Channel  New  England,  which  carries  Boston  Celtics  games  and  reaches  households  in  Connecticut,  Maine,  Massachusetts,  New  Hampshire,  Rhode  Island,  and 
 Vermont.  In  addition,  Comcast  has  an  8.  16%  ownership  interest  in  SportsNet  New  York,  which  launched  in  March  2006,  and  features  regular  season  Mets  games.  See  Comcast  Mar.  29,  2006  Response  to  Information  Request 
 III.  F.  1.;  Comcast  Dec.  22,  2005  Response  to  Information  Request  III.  A.  1.;  see  also  Public  Interest  Statement  at  17  n.  37;  Mark  Newman,  SportsNet  New  York  Begins  New  Era,  Major  League  Baseball,  Mar.  16,  2006,  at 
 http://  mlb.  mlb.  com/  NASApp/  mlb/  news/  article.  jsp?  ymd=  20060315&  content_  id=  1351407&  vkey=  news_  mlb&  text=.  j  sp&  c_  id=  mlb  (last  visited  June  19,  2006). 


 33  Comcasts  team-  specific  networks  are  Falcons  Vision,  Braves  Vision,  and  the  Dallas  Cowboys  Channel.  Public 
 Interest  Statement  at  18.  34 
 Comcast  owns  the  following  non-  sports  local  and  regional  networks  (1)  cn8,  The  Comcast  Network,  which  provides  original  local  and  regional  news,  public  affairs,  sports,  and  family  programming  in  Pennsylvania,  New 


 Jersey,  Delaware,  Maryland,  Massachusetts,  New  Hampshire,  Connecticut  and  Maine  (100%  interest);  (2)  Comcast  Entertainment  TV,  which  is  carried  in  Denver,  Colorado  (100%  interest);  (3)  Comcast  Local,  which  is  carried  in 
 Detroit,  Michigan  (100%  interest);  (4)  Pittsburgh  Cable  News  Channel,  carried  in  Pittsburgh,  Pennsylvania  (30%  interest);  and  (5)  New  England  Cable  News  (50%  interest).  See  Comcast  Mar.  29,  2006  Ex  Parte  at  Att.  (  Video 
 Programming  Networks  in  which  Comcast  has  an  Attributable  Interest);  see  also  Public  Interest  Statement  at  17.  35 
 Public  Interest  Statement  at  16-  17.  Comcast  holds  a  40%  interest  in  PBS  Kids  Sprout.  See  Comcast  Mar.  29,  2006  Response  to  Information  Request  III.  F.  1. 


 36  Public  Interest  Statement  at  9-  11,  73.  This  subscriber  figure  includes  6.6  million  subscribers  served  by  systems 
 that  Time  Warner  Cable  owns  jointly  with  other  cable  operators,  including  systems  co-  owned  with  Comcast  that  serve  1.5  million  subscribers,  and  systems  owned  jointly  with  the  Time  Warner  Entertainment-  Advance/  Newhouse 


 Partnership  (  TWE-  A/  N),  which  owns  systems  serving  5.1  million  subscribers,  of  which  systems  serving  2.9  million  subscribers  are  managed  by  Time  Warner  Cable.  The  remaining  2.  2  million  TWE-  A/  N  subscribers  are 
 served  by  systems  managed  by  Bright  House  Networks,  an  affiliate  of  Advance/  Newhouse.  All  of  the  foregoing  systems  are  attributable  to  Time  Warner  Cable. 


 37  Id.  at  73. 
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 States.  As  a  result  of  the  transactions,  Time  Warner  Cable  would  consolidate  its  regional  operations  in  Western  New  York,  Ohio,  Texas,  Southern  California,  Maine,  North  Carolina,  and  South  Carolina.  38 
 10.  In  addition  to  its  cable  systems,  Time  Warners  businesses  include  online  interactive  services,  filmed  entertainment,  television  networks,  and  publishing.  39  Time  Warner  provides  basic  cable 
 programming,  digital  cable  programming,  HDTV,  VOD,  subscription  video  on-  demand  (  SVOD),  and  DVR  service.  40  Time  Warner  also  provides  high-  speed  Internet  service  to  approximately  4.1  million 
 residential  subscribers,  and  it  provides  VoIP  to  approximately  500,  000  subscribers.  41  Time  Warners  America  Online  businesses  include  the  AOL  service,  a  subscription-  based  online  service  with  more  than 
 22.2  million  members  in  the  United  States.  In  addition  to  AOL,  America  Online  offers  other  interactive  content  and  services  such  as  AOL.  com,  AOL  Instant  Messenger,  Moviefone,  MapQuest,  and 
 Netscape.  com.  42  Time  Warners  television  networks  business  consists  of  domestic  and  international  basic  cable  networks,  pay  television  programming  services,  and  The  WB  broadcast  television  network.  43  Home 
 Box  Office,  Inc.,  an  indirect,  wholly-  owned  subsidiary  of  Time  Warner,  operates  Time  Warners  pay  television  programming  services,  Home  Box  Office  (  HBO)  and  Cinemax.  44  Time  Warner  also  owns  a 
 number  of  24-  hour  local  news  channels.  45  Additionally,  Time  Warner  holds  interests  in  several  RSNs.  46 
 38  Id.  at  5-  6. 
 39  Id.  at  11-  13.  Time  Warner  holds  a  30.  3%  equity  interest  in  iN  DEMAND.  Id.  at  16  n.  35. 
 40  Id.  at  9.  In  2005,  Time  Warner  Cable  conducted  an  IPTV  (i.  e.,  Internet  Protocol  Television)  trial  in  San  Diego, 
 California.  The  service,  called  TWC  Broadband  TV,  permits  existing  video  customers  to  view  75  of  the  most  popular  channels  on  a  broadband  connected  Windows  personal  computer  within  the  subscribers  home.  TWC 


 Broadband  TV  is  essentially  a  video  simulcast  service,  as  opposed  to  a  new  tier,  because  subscribers  are  receiving  programming  via  their  computers  that  they  have  previously  paid  for  and  can  receive  by  traditional  video  delivery. 
 See  Letter  from  Arthur  H.  Harding,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Nov.  10,  2005)  (  Time  Warner  Nov.  10,  2005  Ex  Parte)  at  Decl.  of  Peter  Stern  at  2-  3. 
 Time  Warner  has  also  announced  plans  to  develop  a  family  tier.  41 
 Public  Interest  Statement  at  29,  30.  Time  Warner  states  that  its  VoIP  service  is  available  to  over  two-  thirds  of  its  cable  homes  passed.  Id.  at  29. 


 42  Id.  at  11. 
 43  Id.  at  12-  13.  In  January  2006,  CBS  and  Warner  Brothers  Entertainment  announced  the  merger  of  their  separately 
 owned  networks,  The  WB  and  UPN,  to  form  a  new  broadcast  television  network,  The  CW.  CBS  and  Warner  Brothers  Entertainment  will  each  have  a  50%  interest  in  the  new  entity.  See  CBS  Corp.,  CBS  Corporation  and 


 Warner  Bros.  Entertainment  Form  New  5th  Broadcast  Network,  Jan.  24,  2006,  at  http://  www.  cbscorporation.  com/  news/  prdetails.  php?  id=  173  (last  visited  June  28,  2006).  Through  its  Turner 
 Broadcasting  System  Group,  Time  Warner  Inc.  holds  a  100%  interest  in  a  number  of  programming  services,  including  Boomerang,  Cartoon  Network,  CNN,  CNN  En  Espanol,  CNN  Headline  News,  CNN  International,  Turner 
 Broadcasting  System,  Turner  Classic  Movies,  Turner  Network  Television,  and  Turner  Network  Television  HD.  At  the  time  of  the  filing  of  the  instant  Applications,  Liberty  Media  and  Time  Warner  each  held  a  50%  interest  in  Court 
 TV.  In  May  2006,  Time  Warner  acquired  Liberty  Medias  remaining  50%  interest.  See  Twelfth  Annual  Video  Competition  Report,  21  FCC  Rcd  at  2622-  25  App.  C,  Table  C-  1;  see  also  Public  Interest  Statement  at  Ex.  W; 
 COMMUNICATIONS  DAILY,  May  15,  2006,  at  11-  12.  44 
 Public  Interest  Statement  at  12.  In  addition,  Time  Warner  Inc.  holds  a  100%  interest  in  the  following  programming  services  under  the  HBO  Group,  HBO,  HBO2,  HBO  Comedy,  HBO  Family,  HBO  Latino,  HBO 


 Signature,  HBO  Zone,  HBO  HD,  Cinemax,  Cinemax  HD,  Action  Max,  @Max,  5StarMax,  MoreMax,  Outer  Max,  Thriller  Max,  and  WMAX.  Twelfth  Annual  Video  Competition  Report,  21  FCC  Rcd  at  2622-  25  App.  C,  Table  C-  1. 
 45  Time  Warner  Cables  local  news  channels  include,  Capital  News  9-  Albany,  Albany,  New  York;  News  8  Austin, 
 Austin,  Texas;  News  10  Now-  Syracuse,  Syracuse,  New  York;  News  14,  Carolina-  Charlotte,  Charlotte,  North  Carolina;  News  14,  Carolina-  Raleigh,  Raleigh,  North  Carolina;  NY1  News,  New  York,  New  York;  NY  1  Noticias, 


 New  York,  New  York;  and  R  News,  Rochester,  New  York.  See  Time  Warner  Dec.  20,  2005  Response  to  Information  Request  III.  A. 
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 D.  The  Proposed  Transactions 
 11.  The  Adelphia  Transactions.  47  The  proposed  transactions  involve  a  series  of  discrete  agreements  and  transactions  between  and  among  the  Applicants.  First,  pursuant  to  an  asset  purchase 


 agreement  between  Adelphia  and  Time  Warner  NY  Cable,  LLC  48  (  TWNY)  and  a  separate  asset  purchase  agreement  between  Adelphia  and  Comcast,  TWNY  and  Comcast  would  each  acquire  portions  of 
 substantially  all  of  the  cable  systems  owned  or  operated  by  Adelphia.  49  In  exchange  for  systems  serving  approximately  3.7  million  subscribers,  Time  Warner  Cable  would  pay  approximately  $9.2  billion  in  cash 
 and  would  issue  to  Adelphia  stakeholders  shares  of  Time  Warner  Cables  Class  A  Common  Stock,  which  are  expected  to  represent  approximately  16%  of  Time  Warner  Cables  outstanding  common  equity.  50 
 Comcast  would  receive  systems  serving  approximately  1.2  million  subscribers  and  would  pay  approximately  $3.5  billion  in  cash.  51  The  Applicants  represent  that  each  of  the  Adelphia  Transactions  is 
 (Continued  from  previous  page)  46  When  the  Applications  were  filed,  Time  Warner  Inc.  held,  through  its  wholly-  owned  subsidiary,  Turner 
 Broadcasting  System,  Inc.,  a  100%  interest  in  the  regional  network  Turner  South  (distributed  in  Alabama,  Georgia,  Mississippi,  Tennessee,  South  Carolina,  and  portions  of  North  Carolina),  which  holds  the  distribution  rights  for 
 several  professional  sports  teams,  including  the  Atlanta  Thrashers  National  Hockey  League  team,  the  Atlanta  Hawks  National  Basketball  Association  team,  and  the  Atlanta  Braves  Major  League  Baseball  team.  Time  Warner  Inc.  has 
 since  sold  Turner  South  to  Fox  Networks  Group,  a  subsidiary  of  the  News  Corp.,  for  $375  million.  Turner  South  has  approximately  8.3  million  subscribers.  See  Letter  from  Arthur  H.  Harding,  Fleischman  and  Walsh,  L.  L.  P., 
 Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  3,  2006)  (  Time  Warner  Mar.  3,  2006  Ex  Parte);  Joe  Flint,  News  Corp.  Buys  Turner  South  For  $375  Million,  WALL  ST.  J.,  Feb.  24,  2006,  at  B4. 
 Additionally,  through  Time  Warner  Cable,  Time  Warner  Inc.  holds  a  100%  interest  in  MetroSports,  Kansas  City,  Missouri.  See  Twelfth  Annual  Video  Competition  Report,  21  FCC  Rcd  at  2644-  49  App.  C,  Table  C-  3;  see  also  Time 
 Warner  Cable,  http://  www.  timewarner.  com/  corp/  businesses/  detail/  time_  warner_  cable/  (last  visited  June  19,  2006).  Time  Warner  Inc.  also  has  an  ownership  interest  (26.8%)  in  SportsNet  New  York,  a  New  York  City  based  sports 
 channel  that  launched  in  March  2006.  See  Comcast  Dec.  22,  2005  Response  to  Information  Request  III.  A.  1.;  see  also  Arthur  H.  Harding,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch, 
 Secretary,  FCC,  (Mar.  2,  2006)  (  Time  Warner  Mar.  2,  2006  Ex  Parte)  at  5-  6.  47 
 We  will  use  the  term  Adelphia  Transactions  to  refer  to  the  initial  phase  of  the  overall  transactions  wherein  Time  Warner  and  Comcast  separately  would  acquire  various  cable  systems  that,  in  the  aggregate,  comprise  substantially 


 all  of  the  domestic  cable  systems  owned  or  managed  by  Adelphia.  48 
 Time  Warner  NY  Cable,  LLC  is  a  wholly-  owned  subsidiary  of  Time  Warner  Cable.  Public  Interest  Statement  at  2. 


 49  See  id.  at  Ex.  A,  Asset  Purchase  Agreement,  dated  as  of  April  20,  2005,  between  Adelphia  Communications  Corp. 
 and  Time  Warner  NY  Cable,  LLC,  and  Ex.  B,  Asset  Purchase  Agreement,  dated  as  of  April  20,  2005,  between  Adelphia  Communications  Corp.  and  Comcast  Corp.,  each  as  amended  pursuant  to  amendments  dated  June  24, 


 2005,  June  21,  2006,  and  June  26,  2006.  50 
 Public  Interest  Statement  at  2-  3;  see  also  Letter  from  Arthur  H.  Harding,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  23,  2006)  (  Time  Warner  Mar.  23,  2006  Ex 


 Parte)  at  Att.  1;  Adelphia  Dec.  12,  2005  Response  to  Information  Requests  II.  A.  1,  3,  7,  8  and  9.  51 
 Public  Interest  Statement  at  3,  74.  Of  these,  approximately  one  million  subscribers  are  already  attributable  to  Comcast  via  existing  partnerships.  Id.;  see  also  Adelphia  Dec.  12,  2005  Response  to  Information  Request  II.  A.  6. 


 According  to  Adelphias  Form  10-  K  Annual  Report  for  the  year  ending  Dec.  31,  2004,  if  Adelphias  purchase  agreement  with  Comcast  is  terminated  due  to  failure  to  receive  Commission  or  other  applicable  antitrust  regulatory 
 approvals,  TWNY  has  agreed  to  acquire  the  assets  of  Adelphia  that  Comcast  would  have  acquired  and  to  apply  for  Commission  and  other  regulatory  approvals.  This  agreement,  referred  to  as  the  Expanded  Transaction,  stipulates 
 that  TYNY  will  pay  the  $3.  5  billion  purchase  price  to  have  been  paid  by  Comcast,  and  that  the  Comcast  subsidiaries  that  hold  direct  interests  in  the  Century-  TCI/  Parnassos  Partnerships  will  contribute  the  Comcast  Discharge  Amount, 
 valued  at  between  $549  million  and  $600  million,  to  the  Century-  TCI/  Parnassos  Partnerships.  Thereafter,  the  Century-  TCI/  Parnassos  Partnerships  would  distribute  their  respective  portions  of  the  Comcast  Discharge  Amount  to 
 the  Companys  subsidiaries  that  hold  a  direct  interest  in  such  Century-  TCI/  Partnerships.  See  Adelphia  Report  on  Form  10-  K  for  the  Year  Ending  Dec.  31,  2004  at  36-  37;  see  also  Public  Interest  Statement  at  Exs.  H  and  M. 
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 conditioned  on  contemporaneous  consummation  of  the  other  but  clarify  that  these  transactions  are  not  dependent  on  the  occurrence  of  the  system  swaps  and  redemption  transactions  between  Time  Warner  and 
 Comcast,  as  described  below. 
 12.  The  Time  Warner/  Comcast  Swap  Transactions.  Pursuant  to  an  exchange  agreement,  upon  consummation  of  the  Adelphia  Transactions,  affiliates  of  Time  Warner  and  Comcast  would  exchange 


 certain  cable  systems  owned  by  affiliates  of  Time  Warner  or  Comcast,  respectively,  together  with  certain  cable  systems  to  be  acquired  in  the  Adelphia  Transactions.  52  In  the  swap  transactions,  Time  Warner 
 would  receive  Comcast  systems  located  in  Los  Angeles,  California;  Cleveland,  Ohio;  and  Dallas,  Texas;  and  systems  currently  owned  by  Century-  TCI  Communications,  L.  P.  in  the  Los  Angeles,  California  area 
 and  by  Parnassos  Communications,  L.  P.  and  Western  Cablevision,  L.  P.  in  Ohio  and  western  New  York.  Comcast  would  receive  Time  Warner  Cable  systems  serving  portions  of  Philadelphia,  Pennsylvania  and 
 certain  systems  currently  owned  by  Adelphia  located  in  the  states  of  California,  Colorado,  Connecticut,  Florida,  Georgia,  Kentucky,  Massachusetts,  Maryland,  North  Carolina,  New  Hampshire,  New  York, 
 Pennsylvania,  Tennessee,  Virginia,  Vermont,  Washington,  and  West  Virginia.  53  As  a  result  of  the  system  swaps,  Time  Warner  would  gain  approximately  2,192,667  subscribers  from  Comcast.  Time  Warner 
 would  transfer  to  Comcast  approximately  2,002,680  subscribers.  54 
 13.  Time  Warner  Cable  Redemption  Transaction.  Prior  to  consummation  of  the  Adelphia  Transactions,  and  pursuant  to  the  Time  Warner  Cable  Redemption  Agreement,  Time  Warner  Cable  would 


 redeem  Comcasts  17.9%  equity  interest  in  Time  Warner  Cable,  55  now  held  in  a  Commission-  mandated  trust,  56  in  exchange  for  100%  of  the  common  stock  of  a  Time  Warner  Cable  subsidiary  that,  at  the  closing 
 of  the  redemption  transaction,  would  own  the  Time  Warner  Cable  systems  located  in  or  around  Minneapolis,  Minnesota;  Memphis,  Tennessee;  Cape  Coral,  Florida;  St.  Augustine/  Lake  City/  Live  Oak, 
 Florida;  and  Monroe,  Louisiana,  which  together  served  approximately  [REDACTED]  subscribers  as  of  November  2005.  57  In  addition,  the  Time  Warner  Cable  subsidiary  would  hold  $1.9  billion  in  cash.  58 


 14.  TWE  Redemption  Transaction.  Under  the  TWE  Redemption  Agreement,  TWE  would  redeem  Comcasts  4.7%  limited  partnership  interest  in  TWE  in  exchange  for  100%  of  the  membership 
 interests  of  a  limited  liability  company  that  would  own  the  Time  Warner  Cable  systems  located  in  or 


 52  See  Public  Interest  Statement  at  Ex.  C,  Exchange  Agreement  by  and  among  Comcast  Corp.,  Time  Warner  Cable 
 Inc.,  and  affiliates  of  Comcast  Corp.  and  Time  Warner  Cable  Inc.  53 
 Public  Interest  Statement  at  3.  54 
 See  Letter  from  Arthur  H.  Harding,  Fleischman  and  Walsh,  L.  L.  P,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  31,  2006)  (  Time  Warner  Mar.  31,  2006  Ex  Parte).  Time  Warner  explains  that  the 


 difference  in  subscriber  counting  methodology,  along  with  the  different  subscriber  reporting  periods  and  rounding,  are  factors  accounting  for  a  smaller  net  subscriber  gain  for  Time  Warner  when  compared  to  subscriber  data  included 
 in  the  Applicants  Public  Interest  Statement.  Id.  In  addition,  Comcast  provides  figures  that  differ  slightly  from  those  submitted  by  Time  Warner  because  the  companies  utilize  different  subscriber  counting  methods.  See  Letter 
 from  Martha  E.  Heller,  Wiley  Rein  &  Fielding,  LLP,  Counsel  for  Comcast  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  30,  2006)  (  Comcast  Mar.  30,  2006  Ex  Parte);  see  also  infra  notes  187  and  197. 


 55  See  Public  Interest  Statement  at  Ex.  D,  Time  Warner  Cable  Redemption  Agreement  among  Time  Warner  Inc., 
 Comcast  Corp.,  and  certain  related  entities  of  Time  Warner  and  Comcast  Corporation.  56 
 Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23274-  75    74-  77.  57 
 Public  Interest  Statement  at  3;  id.  at  Ex.  A,  Asset  Purchase  Agreement  between  Adelphia  Communications  Corp.  and  Time  Warner  NY  Cable  LLC,  Section  2.8,  at  53;  see  also  Time  Warner  Dec.  12,  2005  Response  to  Information 


 Request.  Time  Warner  Cable  updated  information  regarding  subscriber  totals  involved  in  each  transaction  and  indicated  that  585,220  subscribers  would  be  transferred  to  Comcast  as  part  of  the  TWC  redemption  transaction.  See 
 Time  Warner  Mar.  23,  2006  Ex  Parte,  Att.  1  at  2.  58 
 Public  Interest  Statement  at  3. 
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 around  Jackson,  Mississippi;  Shreveport,  Louisiana;  and  Houma,  Louisiana,  which  served  approximately  [REDACTED]  subscribers  as  of  November  2005.  59  In  addition,  the  limited  liability  company  would  hold 
 $133  million  in  cash.  60 
 15.  Finally,  upon  completion  of  the  transactions,  Time  Warner  Cable  would  become  a  publicly  traded  company,  with  Time  Warner  owning  84%  of  the  common  stock  and  holding  91%  voting  control  of 


 Time  Warner  Cable.  61  Adelphia  stakeholders  collectively  would  hold  the  remaining  16%  of  Time  Warner  Cable.  At  the  close  of  the  transactions,  independent  directors  would  comprise  half  of  the  board  of 
 directors  of  Time  Warner  for  three  years.  62 
 16.  Upon  consummation  of  the  Adelphia  Transactions,  certain  Commission  licenses  held  by  Adelphia  would  be  assigned  or  control  would  be  transferred  to  Comcast,  its  subsidiaries,  or  affiliates,  and 


 other  Adelphia  licenses  would  be  assigned  to  subsidiaries  or  affiliates  of  Time  Warner  Cable.  In  addition,  upon  consummation  of  the  Time  Warner/  Comcast  Swap  Transactions,  control  of  certain  subsidiaries  or 
 affiliates  of  Time  Warner  Cable  or  Comcast,  respectively,  that  hold  licenses,  including  certain  licenses  acquired  from  Adelphia,  would  be  transferred  from  Time  Warner  to  Comcast  or  from  Comcast  to  Time 
 Warner,  as  the  case  may  be.  Finally,  upon  consummation  of  the  Time  Warner  Cable  Redemption  Transaction  and  the  TWE  Redemption  Transaction,  first  certain  licenses  would  be  assigned  to  a  newly 
 formed  Time  Warner  Cable  subsidiary  on  a  pro  forma  basis,  and  then  control  of  the  new  entity  would  be  transferred  from  Time  Warner  to  Comcast.  The  Applications,  filed  concurrently,  seek  Commission 
 consent  for  those  various  assignments  and/  or  transfers  of  control. 
 E.  Application  and  Review  Process 
 1.  Commission  Review 
 17.  On  May  18,  2005,  pursuant  to  sections  214  and  310(  d)  of  the  Communications  Act,  Adelphia,  Comcast,  and  Time  Warner  filed  210  applications  (excluding  receive-  only  satellite  earth  stations)  seeking 


 Commission  approval  of  the  various  assignments  and  transfers  of  control  associated  with  the  transactions.  The  Commission  released  a  Public  Notice  on  June  2,  2005  accepting  the  applications  for  filing  and 
 establishing  the  pleading  cycle  for  public  comment  or  petitions  to  deny.  63  In  addition  to  initial  and  reply 


 59  Id.  at  2,  Ex.  E;  see  also  Time  Warner  Dec.  12,  2005  Response  to  Information  Request.  In  addition,  Comcast  will 
 retain  in  the  trust  mandated  in  the  Comcast-  AT&  T  Order  shares  of  Time  Warner  common  stock  representing  approximately  1.  3%  of  the  voting  stock  of  Time  Warner.  This  interest  is  not  related  to  the  instant  transactions. 


 Comcast  acquired  these  shares  as  a  result  of  a  restructuring  of  TWE  in  March  2003  subsequent  to  which  Comcast  received  one  share  of  Series  A  Mandatorily  Convertible  Preferred  Stock  of  Time  Warner  that  converted 
 automatically  into  shares  of  Time  Warner  common  stock  on  March  31,  2005.  Public  Interest  Statement  at  4  n.  8.  60 
 Id.  at  4.  Updated  subscriber  information  from  Time  Warner  indicates  that  164,561  subscribers  would  be  transferred  to  Comcast  as  a  result  of  the  TWE  Redemption  Agreement.  See  Time  Warner  Mar.  23,  2006  Ex  Parte  at 


 Att.  2.  61 
 Public  Interest  Statement  at  4.  Time  Warner  also  will  directly  own  approximately  nine  to  12%  of  the  capital  stock  (non-  voting  common  stock)  of  a  subsidiary  of  Time  Warner  Cable.  Time  Warner  Cable  will  own  the  remaining 


 interest  in  the  subsidiary.  Id.  at  4  n.  7.  Applicants  do  not  otherwise  identify  the  referenced  subsidiary.  62 
 Id.  at  4.  63 
 See  Adelphia  Communications  Corporation,  Debtor-  in-  Possession,  Time  Warner  Inc.  and  Comcast  Corporation  Seek  Approval  to  Transfer  Control  and/  or  Assign  FCC  Authorizations  and  Licenses,  Public  Notice,  20  FCC  Rcd 


 10051  (MB  2005)  (  Comment  Public  Notice).  The  Comment  Public  Notice  established  July  5,  2005,  as  the  deadline  for  filing  comments  and/  or  petitions  to  deny,  and  July  20,  2005,  as  the  deadline  for  filing  responses  to 
 comments  and/  or  oppositions  to  the  petitions.  On  June  15,  2005,  the  Acting  Chief  of  the  Media  Bureau  adopted  a  Protective  Order  under  which  third  parties  were  allowed  to  review  confidential  or  proprietary  documents  submitted 
 by  the  Applicants.  See  Adelphia  Communications  Corp.,  et  al.,  20  FCC  Rcd  10751  (MB  2005)  (  Initial  Protective  Order). 
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 comments,  parties  filed  six  petitions  to  deny.  64  The  Commission  has  also  received  over  26,172  informal  comments.  On  December  5,  2005,  the  Chief  of  the  Media  Bureau  requested  additional  information  from 
 the  Applicants.  65  Applicants  separately  filed  responses  to  those  requests  are  included  in  the  record.  66 
 18.  Standing/  Petitions  to  Deny.  67  Section  309(  d)(  1)  of  the  Communications  Act,  as  amended,  68  and  section  78.  22  of  the  Commissions  rules  69  require  that  a  petition  to  deny  contain  specific  allegations 


 64  See  Petition  to  Condition  Approval  of  Application  to  Transfer  Control  of  CARS  Stations,  City  of  Buenaventura, 
 California  (  City  of  San  Buenaventura);  Petition  to  Deny  of  Communications  Workers  of  America,  International  Brotherhood  of  Electrical  Workers  (  CWA/  IBEW);  Petition  to  Deny  of  Free  Press,  Center  for  Creative  Voices  in 


 Media,  Office  of  Communication  of  the  United  Church  of  Christ,  Inc.,  U.  S.  Public  Interest  Research  Group,  Center  for  Digital  Democracy,  CCTV,  Center  for  Media  &  Democracy,  Media  Alliance,  National  Hispanic  Media 
 Coalition,  The  Benton  Foundation  and  Reclaim  the  Media  (  Free  Press);  Petition  to  Deny  of  National  Hispanic  Media  Coalition  (  NHMC);  Petition  of  TCR  Sports  Broadcasting  Holding,  L.  L.  P.  to  Impose  Conditions  or,  in  the 
 Alternative,  to  Deny  Parts  of  the  Proposed  Transaction  (  TCR);  and  The  America  Channel  LLCs  Petition  to  Deny  (  TAC).  On  September  12,  2005,  Black  Television  News  Channel  (  BTNC)  filed  a  Motion  for  Extension  of 
 Time,  seeking  an  extension  until  September  9,  2005,  to  file  reply  comments  in  this  proceeding.  In  support  of  its  motion,  BTNC  states  that  as  a  minority-  owned,  independent  network,  it  is  a  unique  and  important  voice.  BTNC 
 argues  that  the  Commission  should  consider  BTNCs  experiences  in  trying  to  obtain  carriage  by  Comcast  and  Time  Warner  in  its  review  of  the  Applications.  BTNC  further  states  that  it  contacted  counsel  for  the  Applicants  and  gave 
 notice  of  the  motion.  Pursuant  to  section  1.46  of  the  Commissions  rules,  47  C.  F.  R.    1.46,  motions  for  extension  of  time  shall  be  filed  at  least  seven  days  before  the  filing  deadline.  By  Public  Notice,  the  Acting  Chief  of  the  Media 
 Bureau  extended  the  period  for  filing  responses  to  comments  and  oppositions  to  petitions  to  deny  until  August  5,  2005.  See  infra  note  67.  Although  dated  September  8,  2005,  BTNCs  motion  was  officially  received  by  the 
 Commission  on  September  12,  2005,  more  than  30  days  after  the  filing  deadline.  As  such,  BTNC  failed  to  comply  with  the  requirements  for  filing  a  motion  for  extension  of  time.  Moreover,  BTNC  did  not  explain  why  it  could  not 
 participate  in  a  timely  manner.  Therefore,  we  deny  BTNCs  motion  for  extension  of  time.  However,  we  accept  its  reply  comments  and  will  treat  them  as  an  ex  parte  filing.  We  will  address  BTNCs  concerns  in  the  applicable 
 sections  of  this  order.  See  generally  47  C.  F.  R.    1.  1200-  1.1216.  65 
 See  Letter  from  Donna  C.  Gregg,  Chief,  Media  Bureau,  FCC,  to  Brad  Sonnenberg  and  James  N.  Zerefos,  Adelphia  Communications  Corp.,  and  Philip  L.  Verveer,  Michael  H.  Hammer  and  Francis  M.  Buono,  Willkie  Farr  & 


 Gallagher  LLP  (Dec.  5,  2005)  (  Adelphia  Information  Request);  Letter  from  Donna  C.  Gregg,  Chief,  Media  Bureau,  FCC,  to  Steven  N.  Teplitz  and  Susan  A.  Mort,  Time  Warner  Inc.,  and  Aaron  I.  Fleischman,  Arthur  H. 
 Harding,  Seth  A.  Davidson,  and  Craig  A.  Gilley,  Fleischman  and  Walsh,  L.  L.  P.  (Dec.  5,  2005)  (  Time  Warner  Information  Request);  Letter  from  Donna  C.  Gregg,  Chief,  Media  Bureau,  FCC,  to  Joseph  W.  Waz,  Jr.  and  James 
 R.  Coltharp,  Comcast  Corporation  (Dec.  5,  2005)  (  Comcast  Information  Request).  On  December  14,  2005,  the  Applicants  submitted  a  request  for  enhanced  confidential  treatment  for  certain  materials  to  be  submitted  pursuant  to 
 the  referenced  information  requests.  See  Letter  from  Michael  H.  Hammer,  Willkie,  Farr  &  Gallagher,  LLP,  Counsel  for  Adelphia  Communications  Corp.,  to  Donna  C.  Gregg,  Chief,  Media  Bureau,  FCC  (Dec.  14,  2005)  (  Applicants 
 Dec.  14,  2005  Ex  Parte).  The  request  for  enhanced  confidential  treatment  was  granted  and,  thus,  responses  to  certain  of  the  December  5,  2005,  information  requests  were  made  subject  to  a  second  protective  order,  with  access 
 limited  to  outside  counsel  of  record,  their  employees,  and  outside  consultants  and  experts  retained  by  those  counsel  to  assist  in  the  instant  proceeding.  See  Adelphia  Communications  Corp.,  et  al.,  20  FCC  Rcd  20073  (MB  2005) 
 (  Second  Protective  Order).  See  Adelphia  Responses  to  Information  Request  (Dec.  12,  2005,  Dec.  22,  2005,  Jan.  13,  2006,  Jan.  23,  2006);  Comcast  Responses  to  Information  Request  (Dec.  22,  2005,  Jan.  13,  2006,  Mar.  10,  2005, 
 Mar.  23,  2005,  Mar.  24,  2005,  Mar.  29,  2006,  Apr.  7,  2006);  Time  Warner  Responses  to  Information  Request  (Dec.  12,  2005,  Dec.  19,  2005,  Dec.  22,  2005,  Jan.  6,  2006,  Jan.  10,  2006,  Jan.  13,  2006,  Jan.  26,  2006,  Mar.  2,  2006,  Mar. 
 14,  2006,  Mar.  22,  2006,  Mar.  23,  2006  (two  separate  letters),  Mar.  24,  2006).  66 
 In  this  Order,  [  REDACTED]  indicates  confidential  or  proprietary  information,  or  analysis  based  on  such  information,  submitted  pursuant  to  the  Initial  Protective  Order  and/  or  the  Second  Protective  Order.  See  supra  notes 


 63  and  65.  The  unredacted  version  of  this  Order  will  be  available  upon  request  to  those  qualified  representatives  who  execute  and  file  with  the  Commission  the  signed  acknowledgements  required  by  the  protective  orders  in  this 
 proceedings.  See  Initial  Protective  Order,  App.  B    Acknowledgement  of  Confidentiality;  see  also  Second  Protective  Order,  App.  B    Acknowledgment  of  Confidentiality. 
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 of  fact  sufficient  to  show  that  the  petitioner  is  a  party-  in-  interest  and  that  grant  of  the  application  would  be  prima  facie  inconsistent  with  the  public  interest.  Allegations  of  fact  set  forth  in  the  petition  must  be 
 supported  by  the  affidavit  of  a  person  with  personal  knowledge  of  the  facts  recited.  .70 
 19.  Applicants  assert  that  the  pleadings  filed  on  behalf  of  CWA/  IBEW,  Free  Press,  NHMC,  and  TAC  do  not  satisfy  the  statutory  requirements  of  section  309(  d)(  1)  because,  among  other  things,  they  fail 


 to  demonstrate  standing  as  a  party-  in-  interest  and/  or  fail  to  include  an  affidavit  of  a  person  or  persons  with  personal  knowledge  in  support  of  specific  factual  allegations  sufficient  to  show  that  grant  of  the 
 Applications  would  be  prima  facie  inconsistent  with  the  public  interest.  Therefore,  Applicants  urge  the  Commission  to  treat  these  pleadings  as  comments  rather  than  as  petitions  to  deny.  71 


 20.  As  an  initial  matter,  we  agree  that  the  pleadings  filed  by  CWA/  IBEW  and  TAC  fail  to  meet  the  requirements  of  section  309(  d)(  1)  because  neither  group  attached  a  sworn  statement  as  required  by 
 statute.  Thus,  we  conclude  that  CWA/  IBEW  and  TAC  are  appropriately  treated  as  informal  objectors  in  the  instant  proceeding  pursuant  to  Commission  Rule  1.41.  72  Nonetheless,  we  address  fully  the  issues 
 raised  by  these  parties  in  the  applicable  sections  of  this  order.  However,  the  pleadings  filed  by  Free  Press  and  NHMC  are  accompanied  by  affidavits  of  persons  with  personal  knowledge  of  the  facts  alleged  in  the 
 petitions,  which  assert  that  grant  of  the  Applications  would  be  prima  facie  inconsistent  with  the  public  interest.  Thus,  we  find  that  Free  Press  and  NHMC,  respectively,  are  parties  in  interest  to  this 
 proceeding.  73 
 2.  Federal  Trade  Commission  Review 
 21.  In  addition  to  Commission  review,  the  proposed  transactions  are  subject  to  review  by  federal  antitrust  authorities,  in  this  instance  by  the  Federal  Trade  Commission  (  FTC).  74  The  FTC  reviews 


 communications  mergers  and  transactions  pursuant  to  section  7  of  the  Clayton  Act,  which  prohibits  (Continued  from  previous  page) 
 67  The  period  for  filing  comments  and/  or  petitions  to  deny  was  extended  to  July  21,  2005,  and  the  period  for  filing 
 responses  to  comments  and  oppositions  to  petitions  to  deny  was  extended  to  August  5,  2005.  Adelphia  Communications  Corp.,  et  al.,  20  FCC  Rcd  11145  (MB  2005)  (  Extension  of  Time  Order). 


 68  47  U.  S.  C.    309(  d)(  1). 
 69  47  C.  F.  R.    78.22. 
 70  See  Multicultural  Radio,  15  FCC  Rcd  20630  (2000)  (holding  that  petitioners  failure  to  provide  a  supporting 
 affidavit  rendered  his  pleading  procedurally  defective  as  a  petition  to  deny;  pleading  was  thus  treated  as  an  informal  objection);  CHET-  5  Broadcasting,  L.  P.,  14  FCC  Rcd  13041  (1999). 


 71  Applicants  Reply  at  2  n.  2. 
 72  47  C.  F.  R.    1.41;  see  supra  note  70. 
 73  47  U.  S.  C.    309(  d)(  1).  Free  Press  filed  with  its  petition  the  sworn  declaration  of  Ben  Scott,  the  Policy  Director  of 
 Free  Press.  Scott  avers  in  his  declaration  that  (1)  Free  Press  is  a  national  nonpartisan  organization  working  to  generate  policies  that  will  produce  a  more  competitive  and  public  interest-  oriented  media  system;  and  (2)  members 


 of  Free  Press  reside  in  communities  presently  served  by  Comcast,  Time  Warner,  and  Adelphia  cable  systems.  Scott  states  under  penalty  of  perjury  that  the  factual  assertions  set  forth  in  the  sworn  declaration  are  true  and  correct. 
 NHMC  included  with  its  petition  the  declaration  of  Alex  Nogales,  President  and  CEO  of  NHMC.  Nogales  avers  in  his  declaration  that  (1)  NHMC  is  a  coalition  of  Hispanic-  American  organizations  joined  together  to  address  media-related 
 issues  that  affect  the  Hispanic-  American  community;  (2)  NHMCs  goals  are  to  improve  the  image  of  Hispanic-  Americans  portrayed  by  the  media  and  increase  the  number  of  Hispanic-  Americans  employed  in  the 
 media;  and  (3)  members  of  NHMC  reside  in  communities  presently  served  by  Comcast,  Time  Warner,  and  Adelphia,  and  many  are  subscribers  to  their  services.  Nogales  states  under  penalty  of  perjury  that  he  is  familiar  with 
 the  contents  of  the  petition  to  deny,  that  the  factual  assertions  are  true  to  the  best  of  his  knowledge  and  belief,  and  that  the  declaration  is  true  and  correct. 


 74  Several  local  franchising  authorities  (  LFAs)  have  also  reviewed  aspects  of  these  transactions.  We  review  and 
 discuss  issues  pertaining  to  LFA  approval  below  in  the  procedural  section. 
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 mergers  that  are  likely  to  lessen  competition  substantially  in  any  line  of  commerce.  75  FTC  review  is  limited  to  an  examination  of  the  competitive  effects  of  the  transaction,  without  reference  to  other  public 
 interest  considerations. 
 22.  On  January  31,  2006,  the  FTC  announced  that  it  had  closed  its  investigation  into  the  acquisition  by  Comcast  and  Time  Warner  Inc.  of  Adelphias  cable  assets  and  the  transactions  pursuant  to 


 which  Comcast  and  Time  Warner  Cable  will  swap  various  cable  systems.  76  The  Chairman  of  the  FTC,  joined  by  two  commissioners,  stated  that  FTC  staff  had  determined,  and  they  agreed,  that  the  proposed 
 transactions  were  unlikely  to  substantially  lessen  competition  in  any  geographic  region  in  the  United  States  in  violation  of  Section  7  of  the  Clayton  Act.  77  Further,  the  FTC  Chairman  concluded  that  evidence 
 from  the  staffs  investigation  indicated  that  the  proposed  transactions  are  unlikely  to  make  the  hypothesized  foreclosure  or  cost-  raising  strategies  profitable  for  either  Comcast  or  TWC.  78 


 III.  STANDARD  OF  REVIEW  AND  PUBLIC  INTEREST  FRAMEWORK 
 23.  Pursuant  to  sections  214  and  310(  d)  of  the  Communications  Act,  the  Commission  must  determine  whether  Applicants  have  demonstrated  that  the  proposed  transfers  of  control  of  licenses  and 


 authorizations  held  by  Adelphia,  Time  Warner,  and  Comcast  will  serve  the  public  interest,  convenience,  and  necessity.  79  In  making  this  assessment,  the  Commission  must  first  determine  whether  the  proposed 
 transactions  would  comply  with  the  specific  provisions  of  the  Act,  80  other  applicable  statutes,  and  the  Commissions  rules.  81  If  the  transactions  would  not  violate  a  statute  or  rule,  the  Commission  considers 
 whether  they  could  result  in  public  interest  harms  by  substantially  frustrating  or  impairing  the  objectives  or  implementation  of  the  Act  or  related  statutes.  82  The  Commission  then  employs  a  balancing  process, 


 75  15  U.  S.  C.    18. 
 76  See  FTC,  FTCs  Competition  Bureau  Closes  Investigation  into  Comcast,  Time  Warner  Cable  and  Adelphia 
 Communications  Transactions,  at  http://  www.  ftc.  gov/  opa/  2006/  01/  fyi0609.  htm  (last  visited  June  19,  2006).  77 
 See  Statement  of  Chairman  Majoras,  Commissioner  Kavacic,  and  Commissioner  Rosch  Concerning  the  Closing  of  the  Investigation  Into  Transactions  Involving  Comcast,  Time  Warner,  and  Adelphia  Communications,  File  No. 


 051-  0151  (Jan.  31.  2006)  (  Majoras  Statement).  78 
 Id.  at  2.  In  a  statement  concurring  in  part  and  dissenting  in  part,  FTC  Commissioners  Leibowitz  and  Harbour  stated  that  serious  concerns  remain  within  certain  geographic  markets  that  the  transactions  may  raise  the  cost  of 


 sports  programming  to  rival  content  distributors,  thereby  lessening  competition  and  harming  consumers.  See  Statement  of  Commissioners  Jon  Leibowitz  and  Pamela  Jones  Harbour  (Concurring  in  Part,  Dissenting  in  Part), 
 Time  Warner/  Comcast/  Adelphia,  File  No.  051-  0151  (Jan.  31,  2006).  79 
 47  U.  S.  C.    214,  310(  d).  80 
 Section  310(  d)  requires  that  the  Commission  consider  the  applications  as  if  the  proposed  transferee  were  applying  for  the  licenses  directly.  47  U.  S.  C.    310(  d).  See  SBC  Communications  Inc.  and  AT&  T  Corp.  Applications  for 


 Approval  of  Transfer  of  Control,  20  FCC  Rcd  18290,  18300    16  (2005)  (  SBC-  AT&  T  Order);  Verizon  Communications,  Inc.  and  MCI,  Inc.  Applications  for  Approval  of  Transfer  of  Control,  20  FCC  Rcd  18433,  18442- 
 43    16  (2005)  (  Verizon-  MCI  Order);  Applications  of  Nextel  Communications,  Inc.  and  Sprint  Corporation,  20  FCC  Rcd  13967,  13976    20  (2005)  (  Sprint-  Nextel  Order);  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  483    15; 
 Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23255    26.  81 
 See,  e.  g.,  SBC-  AT&  T  Order,  20  FCC  Rcd  at  18300    16;  Verizon-  MCI  Order,  20  FCC  Rcd  at  18442-  43    16;  Applications  for  Consent  to  the  Assignment  of  Licenses  Pursuant  to  Section  310(  d)  of  the  Communications  Act  from 


 NextWave  Personal  Communications,  Inc.,  Debtor-  in-  Possession,  and  NextWave  Power  Partners,  Inc.,  Debtor-  in-Possession,  to  Subsidiaries  of  Cingular  Wireless  LLC,  19  FCC  Rcd  2570,  2580-  81    24  (2004);  EchoStar 
 Communications  Corp.,  General  Motors  Corp.  and  Hughes  Electronics  Corp.,  and  EchoStar  Communications  Corp.,  Hearing  Designation  Order,  17  FCC  Rcd  20559,  20574    25  (2002)  (  EchoStar-  DIRECTV  HDO). 


 82  See  SBC-  AT&  T  Order,  20  FCC  Rcd  at  18300    16;  Verizon-  MCI  Order,  20  FCC  Rcd  at  18443    16;  Sprint-  Nextel 
 Order,  20  FCC  Rcd  at  13976    20. 
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 weighing  any  potential  public  interest  harms  of  the  proposed  transactions  against  any  potential  public  interest  benefits.  83  The  Applicants  bear  the  burden  of  proving,  by  a  preponderance  of  the  evidence,  that 
 the  proposed  transactions,  on  balance,  would  serve  the  public  interest.  84  If  the  Commission  is  unable  to  find  that  the  proposed  transactions  serve  the  public  interest,  or  if  the  record  presents  a  substantial  and 
 material  question  of  fact,  section  309(  e)  of  the  Act  requires  that  the  application  be  designated  for  hearing.  85 


 24.  The  Commissions  public  interest  evaluation  encompasses  the  broad  aims  of  the  Communications  Act,  86  which  include,  among  other  things,  a  deeply  rooted  preference  for  preserving 
 and  enhancing  competition  in  relevant  markets,  87  accelerating  private  sector  deployment  of  advanced  services,  88  ensuring  a  diversity  of  information  sources  and  services  to  the  public,  89  and  generally 
 managing  the  spectrum  in  the  public  interest.  This  public  interest  analysis  may  also  entail  assessing  whether  a  transaction  will  affect  the  quality  of  communications  services  or  will  result  in  the  provision  of 
 new  or  additional  services  to  consumers.  90  In  conducting  this  analysis,  the  Commission  may  consider  technological  and  market  changes,  and  the  nature,  complexity,  and  speed  of  change  of,  as  well  as  trends 
 within,  the  communications  industry.  91 


 83  See  SBC-  AT&  T  Order,  20  FCC  Rcd  at  18300    16;  Verizon-  MCI  Order,  20  FCC  Rcd  at  18443    16;  Sprint-  Nextel 
 Order,  20  FCC  Rcd  at  13976    20;  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  483    15;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23255    26. 


 84  See  SBC-  AT&  T  Order,  20  FCC  Rcd  at  18300    16;  Verizon-  MCI  Order,  20  FCC  Rcd  at  18443    16;  Comcast-AT& 
 T  Order,  17  FCC  Rcd  at  23255    26;  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20574    25.  85 
 47  U.  S.  C.    309(  e);  see  also  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  483  n.  49;  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20574    25. 


 86  Applications  of  AT&  T  Wireless  Services,  Inc.  and  Cingular  Wireless  Corp.  for  Consent  to  Transfer  Control  of 
 Licenses  and  Authorizations,  19  FCC  Rcd  21522,  21544    41  (2004)  (  Cingular-  AT&  T  Wireless  Order);  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  483    16;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23255    27;  EchoStar-DIRECTV 


 HDO,  17  FCC  Rcd  at  20575    26;  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9821    11;  Applications  of  VoiceStream  Wireless  Corporation  or  Omnipoint  Corporation,  Transferors,  and  VoiceStream  Wireless  Holding 
 Company,  Cook  Inlet/  VS  GSM  II  PCS,  LLC,  or  Cook  Inlet/  VS  GSM  III  PCS,  LLC,  Transferees,  15  FCC  Rcd  3341,  3346-  47    11  (2000);  AT&  T  Corp.,  British  Telecommunications,  PLC,  VLT  Co.  L.  L.  C.,  Violet  License  Co.  LLC,  and 
 TNV  [Bahamas]  Limited  Applications,  14  FCC  Rcd  19140,  19146    14  (1999)  (  AT&  T  Corp.-  British  Telecom.  Order);  Application  of  WorldCom,  Inc.,  and  MCI  Communications  Corp.  for  Transfer  of  Control  of  MCI 
 Communications  Corp.  to  WorldCom,  Inc.,  13  FCC  Rcd  18025,  18030    9  (1998)  (  WorldCom-  MCI  Order).  87 
 47  U.  S.  C.    521(  6)  (one  purpose  of  statute  is  to  promote  competition  in  cable  communications  and  minimize  unnecessary  regulation);  47  U.  S.  C.    532(  a)  (purpose  of  section  is  to  promote  competition  in  the  delivery  of 


 diverse  sources  of  video  programming  and  to  assure  that  the  widest  possible  diversity  of  information  sources  are  made  available  to  the  public  from  cable  systems  in  a  manner  consistent  with  growth  and  development  of  cable 
 systems);  see  also  Applications  for  Consent  to  the  Transfer  of  Control  of  Licenses  and  Authorizations  by  Time  Warner,  Inc.  and  America  Online,  Inc.  to  AOL  Time  Warner  Inc.,  16  FCC  Rcd  6547,  6555-  56    22  (2001)  (  AOL-Time 
 Warner  Order).  88 
 See,  e.  g.,  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56    706  (1996)  (providing  for  the  deployment  of  advanced  telecommunications  capabilities). 


 89  47  U.  S.  C.    521(  4);  see  also  47  U.  S.  C.    532(  a). 
 90  See  Cingular-  AT&  T  Wireless  Order,  19  FCC  Rcd  at  21544    41;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23255 
   27;  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9821-  22    11;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18031    9.  91 
 See  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23255    27;  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9821-  22    11;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18031    9. 
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 25.  The  Commissions  competitive  analysis,  which  forms  an  important  part  of  its  public  interest  evaluation,  is  informed  by  traditional  antitrust  principles,  but  is  not  limited  to  them.  92  In  the 
 communications  industry,  competition  is  shaped  not  only  by  antitrust  law,  but  also  by  the  regulatory  policies  that  govern  the  interactions  of  industry  players.  93  In  addition  to  considering  whether  a  transaction 
 will  reduce  existing  competition,  therefore,  the  Commission  also  must  focus  on  whether  the  transaction  will  accelerate  the  decline  of  market  power  by  dominant  firms  in  the  relevant  communications  markets 
 and  the  transactions  effect  on  future  competition.  94  The  Commissions  analysis  recognizes  that  a  proposed  transaction  may  lead  to  both  beneficial  and  harmful  consequences.  For  instance,  combining 
 assets  may  allow  a  firm  to  reduce  transaction  costs  and  offer  new  products,  but  it  may  also  create  market  power,  create  or  enhance  barriers  to  entry  by  potential  competitors,  and  create  opportunities  to 
 disadvantage  rivals  in  anticompetitive  ways.  95 
 26.  Where  appropriate,  the  Commissions  public  interest  authority  enables  it  to  impose  and  enforce  narrowly  tailored,  transaction-  specific  conditions  that  ensure  that  the  public  interest  is  served  by 


 the  transaction.  96  Section  303(  r)  of  the  Communications  Act  authorizes  the  Commission  to  prescribe  restrictions  or  conditions,  not  inconsistent  with  law,  that  may  be  necessary  to  carry  out  the  provisions  of 
 the  Act.  97  Similarly,  section  214(  c)  of  the  Act  authorizes  the  Commission  to  attach  to  the  certificate  such  terms  and  conditions  as  in  its  judgment  the  public  convenience  and  necessity  may  require.  98  Indeed, 
 unlike  the  role  of  antitrust  enforcement  agencies,  the  Commissions  public  interest  authority  enables  it  to  rely  upon  its  extensive  regulatory  and  enforcement  experience  to  impose  and  enforce  conditions  to  ensure 


 92  Cingular-  AT&  T  Wireless  Order,  19  FCC  Rcd  at  21544    42;  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  484    17; 
 EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20575    27;  Application  of  GTE  Corporation  and  Bell  Atlantic  Corporation  for  Consent  to  Transfer  Control  of  Domestic  and  International  Authorizations  and  Application  to 


 Transfer  Control  of  a  Submarine  Landing  License,  15  FCC  Rcd  14032,  14046    23  (2000)  (  Bell  Atlantic-  GTE  Order);  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23256    28;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18033    13. 


 93  Sprint-  Nextel  Order,  20  FCC  Rcd  at  13978    22;  Cingular-  AT&  T  Wireless  Order,  19  FCC  Rcd  at  21545    42; 
 Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23256    28;  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9821    10.  94 
 Bell  Atlantic-  GTE  Order,  15  FCC  Rcd  at  14047    23;  AT&  T  Corp.-  British  Telecom.  Order,  14  FCC  Rcd  at  19147-  48    15;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23256    28. 


 95  Cingular-  AT&  T  Wireless  Order,  19  FCC  Rcd  at  21545    42;  AOL-  Time  Warner  Order,  16  FCC  Rcd  at  6550, 
 6553    5,  15.  96 
 Cingular-  AT&  T  Wireless  Order,  19  FCC  Rcd  at  21545    43;  Bell  Atlantic-  GTE  Order,  15  FCC  Rcd  at  14047-  48    24;  AT&  T  Corp.-  British  Telecom.  Order,  14  FCC  Rcd  at  19148    15;  see  also  WorldCom-  MCI  Order,  13  FCC 


 Rcd  at  18032    10  (stating  that  the  Commission  may  attach  conditions  to  the  transfers);  Applications  of  VoiceStream  Wireless  Corp.,  Powertel  Inc.  and  Deutsche  Telekom  AG  for  Consent  to  Transfer  Control  of  Licenses  and 
 Authorizations,  16  FCC  Rcd  9779,  9782  (2001)  (  Deutsche  Telekom-  VoiceStream  Wireless  Order)  (conditioning  approval  on  compliance  with  agreements  with  Department  of  Justice  and  Federal  Bureau  of  Investigation  addressing 
 national  security,  law  enforcement,  and  public  safety  concerns).  97 
 47  U.  S.  C.    303(  r).  See  Cingular-  AT&  T  Wireless  Order,  19  FCC  Rcd  at  21545    43;  Bell  Atlantic-  GTE  Order,  15  FCC  Rcd  at  14047    24;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18032    10  (citing  FCC  v.  Natl  Citizens  Comm. 


 for  Broadcasting,  436  U.  S.  775  (1978)  (upholding  broadcast-  newspaper  cross-  ownership  rules  adopted  pursuant  to  section  303(  r));  U.  S.  v.  Southwestern  Cable  Co.,  392  U.  S.  157,  178  (1968)  (holding  that  section  303(  r)  permits 
 Commission  to  order  cable  company  not  to  carry  broadcast  signal  beyond  stations  primary  market);  United  Video,  Inc.  v.  FCC,  890  F.  2d  1173,  1182-  83  (D.  C.  Cir.  1989)  (affirming  syndicated  exclusivity  rules  adopted  pursuant  to 
 section  303(  r)  authority)).  98 
 Cingular-  AT&  T  Wireless  Order,  19  FCC  Rcd  at  21545    43;  Bell  Atlantic-  GTE  Order,  15  FCC  Rcd  at  14047    24;  AT&  T  Corp.-  British  Telecom.  Order,  14  FCC  Rcd  at  19148    15. 
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 that  a  transaction  will  yield  overall  public  interest  benefits.  99  Despite  its  broad  authority,  the  Commission  has  held  that  it  will  impose  conditions  only  to  remedy  harms  that  arise  from  the  transaction  (i.  e., 
 transaction-  specific  harms)  100  and  that  are  reasonably  related  to  the  Commissions  responsibilities  under  the  Communications  Act  and  related  statutes.  101 


 27.  The  Applicants  question  both  the  jurisdiction  of  the  Commission  to  determine  whether  these  transactions  are  in  the  public  interest  and  the  elements  of  the  public  interest  standard  the  Commission  has 
 applied  since  1997.  102  First,  the  Applicants  assert  that  their  licenses  for  CARS,  Business  Radio,  and  Private  Operational  Fixed  services  do  not  constitute  a  material  aspect  of  the  Parties  cable  television 
 operations,  and  thus  the  Commissions  jurisdiction  to  conduct  a  public  interest  review  of  the  transactions  is  tenuous.  103  Applicants  state  that  the  Commissions  consideration  of  the  license  transfers  must 
 account  for  the  nature  of  the  licenses  involved  and  their  materiality  to  [the]  business  of  the  licensee.  104  They  fail  to  explain  how  they  interpret  materiality  or  cite  any  authority  for  this  proposition.  Applicants 
 further  suggest  that  the  Commission  should  routinely  approve  merger  transactions  unless  an  opposing  party  submits  prima  facie  evidence  that  a  transaction  is  not  in  the  public  interest.  105 


 28.  We  reject  Applicants  argument  that  the  Commissions  jurisdiction  to  conduct  a  public  interest  review  of  the  transactions  is  tenuous.  Section  214(  a)  provides  in  pertinent  part  that  no  carrier 
 shall  acquire  or  operate  any  line,  or  extension  thereof,  unless  and  until  there  shall  first  have  been  obtained  from  the  Commission  a  certificate  that  the  present  or  future  public  convenience  and  necessity 
 require  or  will  require  the  construction  or  operation,  or  construction  and  operation  of  such  additional  or  extended  line.  106  Section  310(  d)  states  in  pertinent  part  that  [  n]  o  construction  permit  or  station  license, 
 or  any  rights  thereunder,  shall  be  transferred,  assigned,  or  disposed  of  in  any  manner  .  .  .  to  any  person  except  upon  application  to  the  Commission  and  upon  finding  by  the  Commission  that  the  public  interest, 
 convenience  and  necessity  will  be  served  thereby.  107  Thus,  according  to  the  plain  language  of  the  statutory  sections,  each  license  application  is  subject  to  the  Commissions  public  interest  review  and 
 analysis,  and  may  be  granted  subject  to  conditions  as  are  necessary  in  the  public  interest.  Moreover,  we  do  not  agree  with  Applicants  that  the  authorizations  and  licenses  associated  with  the  instant  transactions 
 are  insignificant  or  immaterial  to  their  respective  cable  operations  and  service  to  the  public.  The  parties  have  filed  applications  regarding  83  CARS  licenses,  123  private  land  mobile  radio  and  fixed  microwave 
 services,  346  television  receive-  only  (  TVRO)  licenses,  and  four  section  214  authorizations  to  effectuate 


 99  See,  e.  g.,  Cingular-  AT&  T  Wireless  Order,  19  FCC  Rcd  at  21545    43;  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at 
 477    5;  Bell  Atlantic-  GTE  Order,  15  FCC  Rcd  at  14047-  48    24;  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18034-  35    14. 


 100  Sprint-  Nextel  Order,  20  FCC  Rcd  at  13978-  79    23;  Cingular-  AT&  T  Wireless  Order,  19  FCC  Rcd  at  21545-  46   
 43;  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  534    131;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23302    140;  AOL-  Time  Warner  Order,  16  FCC  Rcd  at  6550    5-  6. 


 101  See  Cingular-  AT&  T  Wireless  Order,  19  FCC  Rcd  at  21545-  46    43;  AOL-  Time  Warner  Order,  16  FCC  Rcd  at 
 6609-  10    146-  47.  102 
 Public  Interest  Statement  at  18-  21  n.  56;  Applicants  Reply  at  44  n.  156.  The  Bell  Atlantic-  NYNEX  public  interest  standard  to  which  Applicants  refer  is  found  in  Applications  of  NYNEX  Corporation,  Transferor,  and  Bell  Atlantic 


 Corporation,  Transferee,  for  Consent  to  Transfer  Control  of  NYNEX  Corporation  and  Its  Subsidiaries,  12  FCC  Rcd  19985,  20001-  08    30-  36  (1997)  (  Bell  Atlantic-  NYNEX  Order). 
 103  Public  Interest  Statement  at  21  n.  56;  see  also  Applicants  Reply  at  44  n.  156. 
 104  Applicants  Reply  at  44  n.  156;  see  also  Public  Interest  Statement  at  21  n.  56. 
 105  Public  Interest  Statement  at  18-  19. 
 106  47  U.  S.  C.    214(  a). 
 107  47  U.  S.  C.    310(  d). 
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 the  acquisition  and  operation  of  Adelphias  owned  or  managed  cable  systems,  as  well  as  the  subsequent  system  swaps  between  Comcast  and  Time  Warner.  108  Contrary  to  the  Applicants  contention,  the 
 Commission  is  required  under  section  310(  d)  to  conduct  a  full  public  interest  review,  which  is  particularly  important  here  given  the  numerous  licenses  that  are  sought  to  be  transferred  in  the  instant  transactions.  109 
 The  courts  have  stated  that  the  contours  of  the  Commissions  public  interest  standard  are  a  matter  for  the  Commissions  discretion  based  on  its  expertise  and  policy  objectives.  110  Although  we  investigate  those 
 issues  raised  by  parties  to  the  proceeding,  we  will  analyze  all  relevant  issues  raised  by  the  transactions  that  in  our  judgment  may  significantly  affect  the  public  interest. 


 29.  Free  Press  maintains  that  section  314  of  the  Act  imposes  an  additional  standard  of  review  beyond  the  standards  embodied  in  sections  214  and  309,  arguing  that  grant  of  the  Applications  in  the 
 form  submitted  would  likely  cause  a  substantial  loss  of  competition  or  creation  of  a  monopoly  in  many  geographic  areas  of  the  United  States  in  violation  of  section  314  of  the  Communications  Act.  111  Free 
 Press  claims  that  the  proposed  transactions  would  violate  section  314  based  on  the  increase  in  the  national  Herfindahl-  Hirschmann  Index  (HHI)  to  over  1800,  a  level  that  Free  Press  claims  the  Department  of 
 Justice  would  consider  to  be  indicative  of  a  highly  concentrated  market.  112  In  addition  to  the  increase  in  national  HHI,  Free  Press  argues  that  the  geographic  rationalization  that  would  result  from  the 
 transactions  would  further  aggravate  the  anticompetitive  effects.  113  Free  Press  states  that  section  314 


 108  CARS  stations  are  authorized  and  licensed  as  radio  services  under  Title  III  of  the  Communications  Act  to  relay 
 TV  broadcast  and  related  audio  signals,  AM  and  FM  broadcast,  and  cablecasting  from  the  point  of  reception  to  a  terminal  point  where  the  signals  are  distributed  to  the  public  by  cable.  47  C.  F.  R.    78.  1;  47  C.  F.  R.    78.  11(  a).  By 


 allowing  the  cable  system  to  distribute  cable  programming  to  its  entire  service  area  regardless  of  certain  physical  obstacles  to  transmission,  CARS  licenses  can  be  an  integral  part  of  a  cable  systems  plant. 


 109  See  Applications  for  Consent  to  Voluntary  Transfer  of  Control  of  11  Stations  in  the  Cable  Television  Relay 
 Service  from  Athena  Communications  Corp.  to  Tele-  Communications,  Inc.,  47  FCC  2d  535  (1974)  (holding  that  transfer  of  only  11  CARS  licenses  was  sufficient  to  bestow  jurisdiction  to  review  impact  of  cable  merger  on  industry 


 as  a  whole,  stating  that  the  application  before  it  reflected  in  essence  a  merger  of  the  third  and  18  th  largest  MSOs  in  the  country  and  would  affect  over  500,000  subscribers). 


 110  See  United  States  v.  FCC,  652  F.  2d  72,  81-  88  (D.  C.  Cir.  1980)  (en  banc)  (affirming  Commission  authorization  of 
 satellite  joint  venture  upon  its  finding  that  the  public  interest  benefits  outweighed  competitive  concerns).  The  court  relied  in  part  on  its  earlier  opinion  in  Greater  Boston  Television  Corp.  v.  FCC,  444  F.  2d  841,  851  (D.  C.  Cir.  1970), 


 where  it  stated  [  a]  ssuming  consistency  with  law  and  the  legislative  mandate,  the  agency  has  latitude  .  .  .  to  select  the  policies  deemed  in  the  public  interest.  444  F.  2d  at  851.  See  also  FCC  v.  RCA  Communications  Inc.,  346  U.  S. 
 86,  96-  97  (1953)  (reversing  the  Commissions  authorization  because  the  Commission  had  relied  on  perceived  congressional  intent  without  conducting  its  own  analysis  as  to  whether  competitive  entry  was  in  the  public  interest). 
 Contrary  to  the  Applicants  suggestion,  the  Commissions  articulation  of  its  public  interest  standard  is  not  immutable.  As  the  D.  C.  Circuit  has  recognized,  an  agencys  view  of  what  is  in  the  public  interest  may  change,  as 
 long  as  the  agency  reasonably  explains  the  changes.  Greater  Boston  Television  Corp.  v.  FCC,  444  F.  2d  at  852  (affirming  the  Commissions  application  of  new  criteria  to  the  license  renewal  process  because  the  Commission 
 explained  the  circumstances  that  justified  its  action).  111 
 Free  Press  Petition  at  4-  9.  Section  314  provides  [  N]  o  person  engaged  directly,  or  indirectly  .  .  .  in  the  business  of  transmitting  and/  or  receiving  for  hire  energy,  communications,  or  signals  by  radio  in  accordance  with  the  terms  of 


 the  license  issued  under  this  Act,  shall  .  .  .  directly  or  indirectly,  operate  any  cable  or  wire  telegraph  or  telephone  line  or  system  between  any  place  in  any  State  .  .  .  and  any  place  in  any  foreign  country  .  .  .  if  .  .  .  the  purpose  is 
 and/  or  the  effect  thereof  may  be  to  substantially  lessen  competition  or  to  restrain  commerce  between  any  place  in  any  State  .  .  .  and  any  place  in  any  foreign  country,  or  unlawfully  to  create  monopoly  in  any  line  of  commerce.  47 
 U.  S.  C.    314.  112 
 For  a  discussion  of  the  calculation  and  application  of  the  HHI,  see  infra  Section  VI.  C.  1.  113 
 Free  Press  Petition  at  7. 
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 requires  the  Commission  to  deny  the  Applications  or  to  impose  conditions  to  alleviate  the  transactions  anticompetitive  affects.  114 
 30.  We  disagree  that  the  instant  transactions  implicate  section  314  of  the  Communications  Act.  Section  314  applies  to  anticompetitive  combinations  of  international  radio  and  cable  companies,  as  well 
 as  the  anticompetitive  operation  of  international  telecommunication  facilities.  115  As  explained  in  a  recent  decision  by  the  Wireless  Telecommunications  Bureau,  section  314  was  included  in  the  original  1934 
 Communications  Act  to  preserve  competition  in  international  communications.  116  Congress  feared  that  the  then-  existing  competition  in  the  international  telecommunications  market  between  high  frequency 
 radio  companies  providing  radiogram  services  and  submarine  cable  companies  providing  cablegram  services  might  be  eliminated  in  the  future  as  a  result  of  consolidation  or  mergers  among  those 
 competitors.  117  Accordingly,  the  Commission  has  held  that  section  314  prohibits  the  acquisition  of  international  facilities  when  the  transfer  would  substantially  lessen  the  competition  between  radio 
 facilities  on  the  one  hand  and  cable  facilities  on  the  other.  118  Free  Press  fails  to  present  any  substantial  evidence  that  the  transactions  are  likely  to  have  anticompetitive  effects  on  international  competition. 
 Based  on  the  foregoing,  we  deny  Free  Press  request  that  we  analyze  the  applications  under  section  314.  Accordingly,  we  consider  the  concerns  raised  by  Free  Press  in  the  context  of  our  established  public 
 interest  review  standard. 
 31.  Finally,  we  note  that  the  transactions  at  issue  involve  a  complex  combination  of  cable  system  sales  and  swaps.  119  The  Applications  reflect  the  cable  system  ownership  that  ultimately  will  result 


 114  Id.  at  4,  9;  see  also  47  U.  S.  C.    314. 
 115  Radiofone,  Inc.  v.  Bellsouth  Mobility,  Inc.,  14  FCC  Rcd  6088  (WTB  1999)  (  Radiofone);  see  also  Mackay 
 Radio  &  Telegraph  Co.,  Inc.  v.  FCC,  97  F.  2d  641  (D.  C.  Cir.  1938).  116 
 Radiofone,  14  FCC  Rcd  at  6102;  see  also  Applications  of  General  Telephone  Co.  of  the  Northwest,  Inc.,  17  FCC  2d  654  (Rev.  Bd.  1969). 


 117  Radiofone,  14  FCC  Rcd  at  6102. 
 118  Stockholders  of  RCA  Corp.  and  General  Electric  Co.,  60  Rad.  Reg.  2d  (P&  F)  563,  568    13  (1986)  (holding  that 
 complainant  presented  no  evidence  to  demonstrate  how  merger  would  adversely  affect  international  competition  in  violation  of  section  314,  or  how  changes  in  competitive  mixture  of  international  facilities  would  occur). 


 119  In  particular,  we  note  that  the  U.  S.  Bankruptcy  Court  for  the  Southern  District  of  New  York  ordered  trifurcated 
 confirmation  hearings  on  Adelphias  reorganization  plan.  On  May  26,  2006,  Adelphia  filed  a  motion  seeking  the  bankruptcy  courts  approval  to  consummate  the  transfer  of  cable  assets  to  Time  Warner  and  certain  other  cable 


 assets  to  Comcast  in  advance  of  the  subsequent  plan  of  reorganization  under  which  the  proceeds  of  the  sale  would  be  distributed.  Adelphia  also  sought  confirmation  of  a  separate  plan  to  sell  its  equity  interest  in  the  Parnassos  and 
 Century-  TCI  Joint  Ventures  to  Comcast  pursuant  to  a  plan  of  reorganization.  Adelphia  sought  authority  to  close  the  sale  of  cable  assets,  with  the  exception  of  the  Parnassos  and  Century-  TCI  Joint  Ventures,  pursuant  to  section  363  of 
 the  Bankruptcy  Code  in  view  of  ongoing  creditor  settlement  issues  and  the  impending  outside  date  of  July  31,  2006,  whereby  the  Applicants  can  terminate  the  cable  purchase  agreements.  In  re  Adelphia  Communications  Corp. 
 et  al.,  Debtors  Motion  Pursuant  to  Sections  105,  363,  365  and  1146  (C)  of  the  Bankruptcy  Code  and  Rules  2002,  6004,  6006  and  9014  of  the  Federal  Rules  of  Bankruptcy  Procedure  Seeking  Approval  of:  (I)  A  Form  of  Notice 
 Regarding  Certain  Hearing  Dates  and  Objection  Deadlines;  (II)  New  Provisions  for  Termination  and  for  the  Payment  or  Crediting  of  the  Breakup  Fee;  (III)  The  Sale  of  Substantially  All  Assets  of  Adelphia  Communications 
 Corporation  and  its  Affiliated  Debtors  to  Time  Warner  NY  Cable  LLC  and  Certain  Other  Assets  to  Comcast  Corporation  Free  and  Clear  of  Liens,  Claims,  Encumbrances,  and  Interests  and  Exempt  from  Applicable  Transfer 
 Taxes;  (IV)  The  Retention,  Assumption  and/  or  Assignment  of  Certain  Agreements,  Contracts  and  Leases;  and  (V)  The  Granting  of  Related  Relief,  No.  02-  41729  (REG)  (Bankr.  S.  D.  N.  Y.,  filed  May  26,  2006).  On  June  28,  2006,  the 
 bankruptcy  court  granted  the  motion.  It  stated  that  the  debtor  parties  are  authorized  to  execute  the  purchase  agreements  or  other  related  documents  and  to  take  any  other  actions  necessary  or  appropriate  to  effectuate  the 
 purchase  agreements.  In  re  Adelphia  Communications  Corp.  et  al,  Order  Authorizing  (I)  Sale  of  Substantially  All  Assets  of  Adelphia  Communications  Corporation  and  its  Affiliated  Debtors  to  Time  Warner  NY  Cable  LLC  and  to 
 Comcast  Corporation,  Free  and  Clear  of  Liens,  Claims,  Encumbrances,  and  Interests  and  Exempt  from  Applicable  (continued.) 
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 following  the  closing  of  all  of  the  transactions.  Our  evaluation  of  the  harms  and  benefits  associated  with  this  complex  combination  of  transactions  would  likely  change  were  one  of  the  elements  in  the 
 combination  to  be  omitted.  Approval  of  the  Applications  is  conditioned,  therefore,  on  consummation  of  all  of  the  transactions  underlying  the  Applications  approved  by  this  Order.  120  In  that  regard,  if  certain 
 transactions  are  not  consummated,  the  Commission  may  require  further  consideration  and/  or  reevaluation  of  the  public  interest  findings  set  forth  herein  and  may  require  Applicants  to  amend  their  Applications.  121 


 32.  Further,  our  ruling  does  not  address  or  resolve  any  state  or  local  franchising  requirements  or  authorizations  necessary  to  be  fulfilled  or  obtained  before  the  transactions  are  consummated.  Therefore, 
 as  set  forth  in  the  ordering  clauses  below,  we  will  require  the  Applicants  to  provide  notice  to  the  Commission  of  any  finding  by  an  LFA  of  ineligibility  to  operate  a  cable  system  or  denial  of  a  franchise 
 transfer  application  for  any  cable  system  that  would  have  undergone  a  change  in  ownership  as  a  result  of  the  transactions  described  in  the  Applications.  We  examine  the  issues  surrounding  local  franchising 
 authority  review  in  greater  detail  in  the  procedural  section  below.  122 
 IV.  APPLICABLE  REGULATORY  FRAMEWORK 
 33.  Our  consideration  of  potential  harms  related  to  MVPD  distribution  and  programming  supply  is  informed  by  the  regulatory  framework  governing  cable  ownership,  program  access,  and  program 


 carriage.  Below  we  summarize  the  statutory  and  regulatory  provisions  that  pertain  to  these  areas  of  concern. 


 (Continued  from  previous  page)  Transfer  Taxes;  (II)  Assumption  and/  or  Assignment  of  Certain  Agreements,  Contracts  and  Leases;  and  (III)  the 
 Granting  of  Related  Relief,  No.  02-  41729  (REG)  (Bankr.  S.  D.  N.  Y.,  June  28,  2006  (Gerber,  J.)).  Thereafter,  on  June  29,  2006,  the  bankruptcy  court  approved  the  sale  of  Adelphias  interests  in  the  Parnassos  and  Century-  TCI  Joint 
 Ventures  to  Comcast.  See  Order  Confirming  Third  Modified  Fourth  Amended  Joint  Plan  of  Reorganization  Under  Chapter  11  of  the  Bankruptcy  Code  for  the  Century-  TCI  Debtors  and  Parnassos  Debtors,  No.  02-  41729  (REG) 
 (Bankr.  S.  D.  N.  Y.,  June  29,  2006  (Gerber,  J.)).  120 
 These  transactions  are  reflected  in  several  agreements  by  and  among  the  Applicants,  specifically  (1)  Asset  Purchase  Agreement,  dated  as  of  April  20,  2005,  between  Adelphia  Communications  Corp.  and  Time  Warner  NY 


 Cable  LLC;  (2)  Asset  Purchase  Agreement,  dated  as  of  April  20,  2005,  between  Adelphia  Communications  Corp.  and  Comcast  Corp.;  (3)  Exchange  Agreement,  dated  as  of  April  20,  2005,  by  and  among  Comcast  Corp.;  Time 
 Warner  Inc;  and  certain  other  related  entities;  (4)  Redemption  Agreement,  dated  as  of  April  20,  2005,  by  and  among  Comcast  Cable  Communications  Holdings,  Inc.;  Time  Warner  Inc.;  and  certain  other  related  entities;  and 
 (5)  Redemption  Agreement,  dated  as  of  April  20,  2005,  by  and  among  Comcast  Cable  Communications  Holdings,  Inc.;  Time  Warner  Entertainment  Company,  L.  P.;  and  certain  other  related  entities.  Public  Interest  Statement  at  Exs. 
 A-  E.  121 
 As  with  all  assignments  and  transfers  of  CARS  licenses,  the  license  transfers  approved  herein  must  be  consummated  and  notification  provided  to  the  Commission  within  60  days  of  the  date  of  public  notice  of  approval, 


 pursuant  to  our  rules.  47  C.  F.  R.    78.  35(  e).  If  the  Applicants  are  unable  to  consummate  any  of  the  license  transfers  contained  in  the  Applications  consistent  with  the  provisions  of  section  78.35(  e)  because  LFA  approvals  are  still 
 pending,  or  for  any  other  reason,  the  Applicants  must  submit  written  notice  to  the  Commission  prior  to  expiration  of  the  60-  day  deadline.  If  the  Applicants  are  unable  to  consummate  the  transfers  consistent  with  the  provisions  of 
 section  78.35(  e),  the  Applicants  must  seek  an  extension  of  time  within  which  to  consummate  or  withdraw  the  affected  license  transfer  applications.  Specifically,  the  Applicants  must  provide  notice  of  the  reason  for  their 
 inability  to  consummate  any  of  the  transfers;  identification  of  the  affected  cable  systems,  including  the  community  and  the  number  of  subscribers  attributable  to  each  cable  system;  and  identification  of  the  relevant  CARS,  wireless  or 
 other  authorization.  In  addition,  if  the  Applicants  failure  to  consummate  would  result  in  violation  of  any  Commission  rule,  the  Applicants  must  file  within  30  days  of  the  action  that  results  in  violation  of  the  rule(  s)  the 
 necessary  applications  to  remedy  the  violation.  122 
 See  infra  Section  X.  A. 
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 A.  Cable  Ownership 
 34.  In  section  613(  f)  of  the  Act,  adopted  as  part  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992,  Congress  directed  the  Commission  to  conduct  proceedings  to  establish 


 reasonable  limits  on  the  number  of  subscribers  a  cable  operator  may  serve,  the  cable  ownership  limit,  and  on  the  number  of  channels  a  cable  operator  may  devote  to  its  affiliated  programming  networks,  the 
 channel  occupancy  limit.  123  A  principal  goal  of  this  mandate  was  to  foster  a  diverse,  robust,  and  competitive  market  in  the  acquisition  and  delivery  of  multichannel  video  programming  124  by  encouraging 
 the  development  of  alternative  and  new  technologies,  including  cable  and  non-  cable  systems.  125  Congress  found  that  the  cable  industry,  the  dominant  and  increasingly  horizontally  concentrated  medium  for  the 
 delivery  of  multi-  channel  programming,  faced  virtually  no  competition  at  the  local  level  and  only  limited  competition  at  the  regional  and  national  level.  126  The  Senate  Report  concluded  that  increased  horizontal 
 concentration  could  give  cable  operators  the  power  to  demand  that  programmers  provide  cable  operators  an  exclusive  right  to  carry  the  programming,  a  financial  interest,  or  some  other  added  consideration  as  a 
 condition  of  carriage  on  the  cable  system.  127  Additionally,  Congress  found  that  the  increase  in  vertical  integration  between  cable  operators  and  programmers  provided  the  incentives  and  opportunities  for  cable 
 operators  to  favor  affiliated  over  non-  affiliated  programmers  and,  similarly,  for  programmers  to  favor  affiliated  over  non-  affiliated  operators  in  the  distribution  of  video  programming.  128  Thus,  given  the 
 absence  of  competition,  Congress  believed  that  certain  structural  limits  were  necessary.  129 
 35.  Congress  intended  that  the  structural  ownership  limits  mandated  by  section  613(  f)  would  ensure  that  cable  operators  did  not  use  their  dominant  position  in  the  MVPD  market,  acting  unilaterally  or 


 jointly,  to  unfairly  impede  the  flow  of  video  programming  to  consumers.  130  At  the  same  time,  Congress  recognized  that  multiple  system  ownership  could  provide  benefits  to  consumers  by  allowing  efficiencies 
 in  the  administration,  distribution,  and  procurement  of  programming,  as  well  as  by  providing  capital  and  a  ready  subscriber  base  to  promote  the  introduction  of  new  programming  services.  131 


 36.  In  1993,  based  on  proceedings  initiated  pursuant  to  section  613(  f),  the  Commission  established  the  cable  ownership  and  channel  occupancy  limits.  132  The  cable  ownership  limit,  which  has 
 since  been  amended,  prohibited  any  cable  operator  from  serving  more  than  30%  of  all  homes  passed  by 


 123  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992,  P.  L.  No.  102-  385,  106  Stat.  1460  (  1992 
 Act),  Communications  Act    613(  f),  47  U.  S.  C.    533(  f).  124 
 See  S.  REP.  NO.  102-  92,  1,  18  (1991)  (  Senate  Report);  H.  R.  REP.  NO.  102-  628,  1,  27  (1992)  (  House  Report);  see  also  1992  Act    2(  a)(  4),  (b)(  1)-(  5). 


 125  See  1992  Act    2(  b)(  1)-(  5);  see  generally  Senate  Report,  House  Report. 
 126  See  1992  Act    2(  a)(  2)-(  4),  (6);  Senate  Report  at  12-  18,  20,  32-  34;  House  Report  at  26-  27,  42-  47. 
 127  Senate  Report  at  24. 
 128  See  id.  at  24  (stating  that  [  w]  hen  cable  systems  are  not  subject  to  effective  competition  .  .  .  [p]  rogrammers  either 
 deal  with  operators  of  such  systems  on  their  terms  or  face  the  threat  of  not  being  carried  in  that  market.  The  Committee  believes  this  disrupts  the  crucial  relationship  between  the  content  provider  and  the  consumer  .  .  .  . 


 Moreover,  these  concerns  are  exacerbated  by  the  increased  vertical  integration  in  the  cable  industry.);  see  also  1992  Act    2(  a)(  5)-(  6);  House  Report  at  41. 
 129  See  Senate  Report  at  18,  33;  House  Report  at  26-  27,  30,  40-  44. 
 130  47  U.  S.  C.    533(  f)(  2)(  A). 
 131  House  Report  at  43;  see  also  Senate  Report  at  33. 
 132  Implementation  of  Sections  11  and  13  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992, 
 Horizontal  and  Vertical  Ownership  Limits,  8  FCC  Rcd  8565,  8567    3-  4  (1993)  (  1993  Cable  Ownership  Second  Report  and  Order). 
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 cable  systems  nationwide.  133  The  channel  occupancy  limit,  which  remains  in  effect,  prohibited  a  cable  operator  from  carrying  affiliated  programming  on  more  than  40%  of  its  activated  channels,  up  to  75 
 channels.  134  In  adopting  these  limits,  the  Commission  found  that  the  30%  cable  ownership  limit  is  generally  appropriate  to  prevent  the  nations  largest  MSOs  from  gaining  enhanced  leverage  from 
 increased  horizontal  concentration,  while  at  the  same  time,  ensur[  ing]  that  a  majority  of  MSOs  continue  to  expand  and  benefit  from  the  economies  of  scale  necessary  to  encourage  investment  in  new  video 
 programming  services  and  the  deployment  of  advanced  cable  technologies.  135  To  reflect  changed  market  conditions  and  allow  for  organic  growth  in  subscribership,  the  Commission  revised  the  30%  cable 
 ownership  limit  in  1999  to  permit  a  cable  operator  to  reach  30%  of  all  MVPD  subscribers,  rather  than  solely  cable  subscribers.  136  The  Commission  found  that  the  40%  channel  occupancy  limit  remains 
 appropriate  to  balance  the  goals  of  increasing  diversity  and  reducing  the  incentive  and  ability  of  vertically  integrated  cable  operators  to  favor  their  affiliated  programming,  with  the  benefits  and 
 efficiencies  associated  with  vertical  integration.  137  The  75-  channel  maximum  reflected  the  Commissions  recognition  that  expanded  channel  capacity  would  reduce  the  need  for  channel  occupancy 
 limits  as  a  means  of  encouraging  cable  operators  to  carry  unaffiliated  programming.  138  The  Commission  also  recognized  that  the  dynamic  state  of  cable  technology  required  that  it  undertake  periodic  reviews  of 
 the  channel  occupancy  limit.  139 
 37.  On  review,  in  Time  Warner  Entertainment  Co.  v.  FCC  (  Time  Warner  II),  the  United  States  Court  of  Appeals  for  the  District  of  Columbia  Circuit  reversed  and  remanded  the  Commissions  decision 


 imposing  the  cable  ownership  and  channel  occupancy  limits.  140  The  court  found  that  the  limits  unduly  burdened  cable  operators  First  Amendment  rights,  141  the  Commissions  evidentiary  basis  for  imposing 
 the  limits  did  not  meet  the  applicable  standards  of  review,  142  and  the  Commission  had  failed  to  consider 
 133  Id.  at  8567    3. 
 134  Id.  at  8567    4.  For  a  system  with  75  or  fewer  channels,  the  limit  is  40%  of  actual  activated  channel  capacity; 
 60%  of  activated  channel  capacity  must  be  reserved  for  unaffiliated  programming,  i.  e.,  45  channels  for  a  75  channel  system.  For  systems  with  75  or  more  channels,  the  limit  is  applied  only  to  75  channels,  meaning,  in  effect,  that  45 


 channels  on  such  systems  must  be  reserved  for  unaffiliated  programming  (60%  of  75).  As  a  result,  the  limit  for  larger  systems  is  effectively  higher,  when  expressed  as  a  percentage  of  system  capacity,  than  the  limit  for  systems 
 with  75  channels  or  fewer.  135 
 Id.  at  8577    25.  136 
 Implementation  of    11(  c)  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992,  Horizontal  Ownership  Limits,  14  FCC  Rcd  19098,  19101    5  (1999)  (  1999  Cable  Ownership  Order).  MVPD  subscribers 


 include  subscribers  of  cable  services  and  direct  broadcast  satellite  (  DBS)  services,  as  well  as,  inter  alia,  subscribers  to  direct-  to-  home  satellite  services,  multichannel  multipoint  distribution  services,  local  multipoint 
 distribution  services,  satellite  master  antenna  television  services,  and  open  video  system  services.  47  C.  F.  R.    76.  503(  e).  In  addition,  a  cable  operators  national  reach  for  purposes  of  determining  compliance  with  the  limit 
 excludes  cable  subscribers  that  a  cable  operator  does  not  serve  through  cable  franchises  existing  as  of  October  20,  1999,  and  all  successors  in  interest  to  those  franchises.  47  C.  F.  R.    76.503(  b)-(  c). 
 137  1993  Cable  Ownership  Second  Report  and  Order,  8  FCC  Rcd  at  8594    68. 
 138  The  application  of  the  limit  to  only  75  channels  was  based  on  the  technological  capacity  of  the  average  cable 
 system  in  1993,  which  generally  could  offer  approximately  75  channels  of  video  programming.  Id.  at  8601-  02    84  &  n.  106. 


 139  Id.  at  8594  n.  86  (measurement  of  the  channel  occupancy  rule  to  be  done  on  a  per  channel  basis  using  the 
 traditional  6  MHz  channel  definition;  periodic  review  necessary  in  light  of  fact  that  it  may  soon  be  common  for  cable  operators  to  provide  several  channels  using  a  single  6  MHz  bandwidth  segment). 


 140  240  F.  3d  1126,  1136,  1139  (D.  C.  Cir.  2001).  The  D.  C.  Circuit  upheld  the  underlying  statute  in  Time  Warner 
 Entertainment  Co.  v.  United  States,  211  F.  3d  1313,  1316-  21  (D.  C.  Cir.  2000)  (  Time  Warner  I).  141 
 Time  Warner  II,  240  F.  3d  at  1135-  39. 
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 sufficiently  changes  that  had  occurred  in  the  MVPD  market  since  passage  of  the  1992  Act.  143  The  Time  Warner  II  court  did  not  vacate  the  rules.  144 
 38.  In  response  to  the  courts  remand,  the  Commission  issued  a  Further  Notice  of  Proposed  Rulemaking  to  address  how  to  revise  the  limits  in  compliance  with  the  courts  directives.  145  The 
 comments  and  evidentiary  record  compiled  in  response  to  the  Cable  Ownership  Further  Notice  did  not  provide  a  sufficient  evidentiary  basis  for  setting  new  limits,  and  the  Commission  therefore  released  a 
 Second  Further  Notice  of  Proposed  Rulemaking,  seeking  updated  and  more  specific  comment  on  the  pertinent  issues.  146  That  proceeding  is  pending.  Comcast  and  Time  Warner  will  be  expected  to  comply 
 with  any  revised  limits  that  the  Commission  may  adopt  in  the  pending  rulemaking  proceeding. 
 B.  Program  Access 
 39.  In  section  628  of  the  Communications  Act,  adopted  as  part  of  the  1992  Act,  Congress  directed  the  Commission  to  promulgate  rules  governing  MVPDs  access  to  programming.  At  that  time, 


 Congress  was  concerned  that  most  cable  operators  enjoyed  a  monopoly  in  program  distribution  at  the  local  level.  147  Congress  found  that  vertically  integrated  program  suppliers  had  the  incentive  and  ability  to 
 favor  their  affiliated  cable  operators  over  nonaffiliated  cable  operators  and  programming  distributors  using  other  technologies.  148  Section  628  is  intended  to  foster  the  development  of  competition  to 
 traditional  cable  systems  by  facilitating  competing  MVPDs  access  to  cable  programming  services.  DBS  was  among  the  technologies  that  Congress  intended  to  foster  through  the  program  access  provisions.  149 
 As  a  general  matter,  the  program  access  rules  prohibit  a  cable  operator,  a  satellite  cable  programming  vendor  150  in  which  a  cable  operator  has  an  attributable  interest,  or  a  satellite  broadcast  programming 
 vendor  151  from  engaging  in  unfair  methods  of  competition  or  unfair  or  deceptive  acts  or  practices,  the  purpose  or  effect  of  which  is  to  hinder  significantly  or  to  prevent  any  MVPD  from  providing  satellite 
 cable  programming  or  satellite  broadcast  programming  to  subscribers  or  consumers.  152  Thus,  Congress 
 (Continued  from  previous  page)  142  Id. 
 143  Id.  at  1134-  36,  1139. 
 144  In  addition,  as  the  court  noted,  the  Commissions  voluntary  stay  of  enforcement  of  the  cable  ownership  limit 
 ended  automatically  upon  the  reversal  of  the  District  Courts  decision  in  Daniels  Cablevision,  Inc.  v.  United  States,  835  F.  Supp.  1  (D.  D.  C.  1993)  (  Daniels).  Time  Warner  II,  240  F.  3d  at  1128.  The  Commission  issued  the 


 stay  pending  the  courts  determination  of  the  limits  constitutionality  in  Daniels.  See  1993  Cable  Ownership  Second  Report  and  Order,  8  FCC  Rcd  at  8609    109. 
 145  Implementation  of  Section  11  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992,  The 
 Commissions  Horizontal  and  Vertical  Ownership  Limits,  16  FCC  Rcd  17312  (2001)  (  Cable  Ownership  Further  Notice). 


 146  The  Commissions  Cable  Horizontal  and  Vertical  Ownership  Limits,  20  FCC  Rcd  9374  (2005)  (  Cable 
 Ownership  Second  Further  Notice).  147 
 H.  R.  CONF.  REP.  NO.  102-  862,  at  93  (1992).  148 
 1992  Act    2(  a)(  5).  149 
 House  Report  at  165-  66  (additional  views  of  Messrs.  Tauzin,  Harris,  Cooper,  Synar,  Eckart,  Bruce,  Slattery,  Boucher,  Hall,  Holloway,  Upton  and  Hastert). 


 150  Satellite  cable  programming  is  video  programming  that  is  transmitted  via  satellite  to  cable  operators  for 
 retransmission  to  cable  subscribers.  47  C.  F.  R.    76.  1000(  h).  A  satellite  cable  programming  vendor  is  an  entity  engaged  in  the  production,  creation  or  wholesale  distribution  for  sale  of  satellite  cable  programming.  47  C.  F.  R. 


   76.1000(  i).  Over-  the-  air  broadcast  programming  is  not  subject  to  the  program  access  rules.  151 
 A  satellite  broadcast  programming  vendor  is  a  fixed  service  satellite  carrier  that  provides  service  pursuant  to  17  U.  S.  C.    119  with  respect  to  satellite  broadcast  programming.  47  C.  F.  R.    76.  1000(  g). 


 152  Communications  Act    628(  b);  47  U.  S.  C.    548(  b). 
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 acknowledged  that  access  to  satellite  cable  programming  was  essential  to  ensure  competition  and  diversity  in  the  satellite  programming  and  MVPD  markets. 
 40.  The  program  access  rules  adopted  by  the  Commission  specifically  prohibit  cable  operators,  a  satellite  cable  programming  vendor  in  which  a  cable  operator  has  an  attributable  interest,  or  a  satellite 
 broadcast  programming  vendor  from  (1)  significantly  hindering  or  prohibiting  an  MVPD  from  making  satellite  cable  programming  available  to  subscribers  or  consumers;  153  (2)  discriminating  in  the  prices, 
 terms,  and  conditions  of  sale  or  delivery  of  satellite  cable  programming;  154  or  (3)  entering  into  exclusive  contracts  with  cable  operators  unless  the  Commission  finds  the  exclusivity  to  be  in  the  public  interest.  155 
 Aggrieved  entities  can  file  a  complaint  with  the  Commission.  156  Remedies  for  violations  of  the  rules  may  include  the  imposition  of  damages  and  the  establishment  of  reasonable  prices,  terms,  and  conditions  for 
 the  sale  of  programming.  157 
 41.  As  required  by  statute,  in  2002,  the  Commission  examined  the  developments  and  changes  in  the  MVPD  marketplace  in  the  ten  years  since  the  enactment  of  section  628  and  considered  whether  the 


 exclusivity  prohibition  in  its  program  access  rules  should  sunset.  158  The  Commission  considered  whether,  without  the  exclusivity  prohibition,  vertically  integrated  programmers  would  have  the  incentive  and 
 ability  to  favor  their  affiliated  cable  operators  over  nonaffiliated  MVPDs  and,  if  they  would,  whether  such  behavior  would  harm  competition  and  diversity  in  the  distribution  of  video  programming.  159  The 
 Commission  held  that  access  to  all  vertically  integrated  satellite  cable  programming  continues  to  be  necessary  in  order  for  competitive  MVPDs  to  remain  viable  in  the  marketplace.  160  The  Commission  also 
 found  that  vertically  integrated  programmers  retain  the  incentive  to  favor  their  affiliated  cable  operators  over  competing  MVPDs.  161  In  that  regard,  the  Commission  found  that  cable  operators  continue  to 
 dominate  the  MVPD  marketplace  and  that  horizontal  consolidation  and  clustering,  combined  with  affiliation  with  regional  programming,  have  contributed  to  cables  overall  market  dominance.  162  In 
 addition,  the  Commission  determined  that  an  economic  basis  for  denying  competitive  MVPDs  access  to  vertically  integrated  programming  continues  and  concluded  that  such  denial  would  harm  competitors 
 ability  to  compete  for  subscribers.  163  Accordingly,  the  Commission  extended  the  prohibition  on  exclusive  contracts  for  satellite-  delivered  cable  and  satellite-  delivered  broadcast  programming  for  five  years,  until 
 October  5,  2007.  164 
 42.  The  Commission  explained  that  there  is  a  continuum  of  vertically  integrated  programming,  ranging  from  services  for  which  there  may  be  substitutes  (the  absence  of  which  from  a  rival  MVPDs 


 program  lineup  would  have  little  impact),  to  those  for  which  there  are  imperfect  substitutes,  to  those  for 
 153  47  C.  F.  R    76.  1001. 
 154  47  C.  F.  R.    76.1002(  b). 
 155  47  C.  F.  R.    76.1002(  c)(  2)  and  (4).  The  exclusivity  prohibition  sunsets  on  October  5,  2007,  unless  extended  by 
 the  Commission.  47  C.  F.  R.    76.  1002(  c)(  6);  see  infra  para.  41.  156 
 47  C.  F.  R.    76.1003.  157 
 47  C.  F.  R.    76.1003(  h).  158 
 Implementation  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992,  17  FCC  Rcd  12124  (2002)  (  Program  Access  Order). 


 159  Program  Access  Order,  17  FCC  Rcd  at  12130    16. 
 160  Id.  at  17  FCC  Rcd  at  12138    32. 
 161  Id.  at  17  FCC  Rcd  at  12143-  44    45. 
 162  Id.  at  17  FCC  Rcd  at  12125    4. 
 163  Id. 
 164  Id.  at  17  FCC  Rcd  at  12161    80. 
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 which  there  are  no  close  substitutes  at  all  (the  absence  of  which  from  a  rival  MVPDs  lineup  would  have  a  substantial  impact).  165  The  Commission  found  that  an  MVPDs  ability  to  compete  effectively  with  an 
 incumbent  cable  operator  is  significantly  harmed  if  it  is  denied  access  to  must  have  vertically  integrated  programming,  for  which  there  is  no  good  substitute.  166  Further,  the  Commission  recognized  that  certain 
 programming  services,  such  as  sports  programming,  or  marquee  programming,  such  as  HBO,  may  be  essential  and  for  practical  purposes,  must  haves  for  program  distributors  and  their  subscribers  .  .  .  .  167 
 The  Commission  noted,  however,  the  difficulty  of  developing  an  objective  process  of  general  applicability  to  determine  what  programming  may  or  may  not  be  essential  to  preserve  and  protect 
 competition.  168  The  Commission  therefore  declined  to  promulgate  a  generally-  applicable  rule  that  defined  essential  programming  services  in  order  to  narrow  the  scope  of  the  exclusivity  prohibition.  169 


 C.  Program  Carriage 
 43.  Section  616  of  the  1992  Cable  Act  requires  the  Commission  to  establish  regulations  governing  program  carriage  agreements  and  related  practices  between  cable  operators  or  other 


 multichannel  video  programming  distributors  and  video  programming  vendors.  170  Congress  enacted  section  616  based  on  findings  that  some  cable  operators  had  required  certain  non-  affiliated  program 
 vendors  to  grant  exclusive  rights  to  programming,  a  financial  interest  in  the  programming,  or  some  other  additional  consideration  as  a  condition  of  carriage  on  the  cable  system.  171  Accordingly,  the 
 Commissions  rules  implementing  section  616  prohibit  all  MVPDs  from  (1)  demanding  a  financial  interest  in  any  program  service  as  a  condition  of  carriage  of  the  service  on  its  system;  (2)  coercing  any 
 video  programming  vendor  to  provide  exclusive  rights  as  a  condition  of  carriage;  and  (3)  unreasonably  restraining  the  ability  of  a  video  programming  vendor  to  compete  fairly  by  discriminating  on  the  basis  of 
 affiliation  or  non-  affiliation  of  vendors  in  the  selection,  terms,  or  conditions  of  carriage.  172  The  program  carriage  rules  also  specify  complaint  procedures  and  remedies  for  violations  of  these  requirements. 
 Complaints  may  be  brought  by  aggrieved  video  programmers  or  MVPDs.  173 
 V.  COMPLIANCE  WITH  COMMISSION  RULES 
 44.  In  this  section,  we  consider  whether  the  transactions  are  likely  to  violate  any  Commission  rules.  174  Specifically,  we  consider  whether  Comcast  and  Time  Warner  will  remain  in  compliance  with  the 


 165  Id.  at  17  FCC  Rcd  at  12139    33. 
 166  Must  have  programming,  an  industry  term,  describes  the  high  value  consumers  place  on  the  programming  and 
 on  the  lack  of  available  substitutes.  Referring  to  programming  as  must  have  is  not  meant  to  imply  that  an  MVPD  cannot  survive  without  the  programming. 


 167  Program  Access  Order,  17  FCC  Rcd  at  12156    69.  The  Commission  also  listed  regional  news  and  regional 
 sports  programming  as  examples  of  must  have  programming.  168 
 Id.  169 
 Id.  170 
 47  U.  S.  C.    536(  a).  171 
 Implementation  of  Sections  12  and  19  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992,  9  FCC  Rcd  2642,  2643    2  (1993)  (  Second  Program  Carriage  Order);  see  also  47  U.  S.  C.    536(  a)(  1)-(  3). 


 172  See  47  C.  F.  R.    76.  1301;  see  also  Second  Program  Carriage  Order,  9  FCC  Rcd  at  2649    16. 
 173  Section  76.  1302  authorizes  video  programming  vendors  and  MVPDs  to  file  program  carriage  complaints  with  the 
 Commission.  47  C.  F.  R.    76.  1302;  see  also  Second  Program  Carriage  Order,  9  FCC  Rcd  at  2652-  57    23-  36.  174 
 In  the  following  sections,  we  examine  whether  the  transactions  are  likely  to  contravene  the  policy  goals  underlying  section  613(  f). 
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 Commission's  cable  ownership  limit,  cable  channel  occupancy  rule,  and  various  cross-  ownership  rules.  175  We  find  that  the  transactions  will  not  result  in  a  violation  of  any  of  these  rules. 
 A.  National  Cable  Ownership  Limit 
 45.  The  Applicants  assert  that  both  Time  Warner  and  Comcast  will  remain  in  compliance  with  the  Commissions  cable  ownership  limit  after  the  transactions  are  completed.  176  Comcast  contends  that, 


 following  the  transactions,  it  will  have  a  national  subscribership  of  28.9%  of  all  MVPD  subscribers,  falling  within  the  30%  limit.  177  Comcast  states  that  it  currently  has  approximately  26,100,352  attributable 
 subscribers,  or  28.2%  of  all  MVPD  subscribers.  178  As  a  result  of  the  transactions,  it  expects  to  gain  approximately  680,000  attributable  subscribers,  for  a  post-  transaction  total  of  approximately  26,780,352 
 attributable  subscribers.  179  Using  a  denominator  of  92.6  million  MVPD  subscribers  nationwide,  Comcast  calculates  that  its  current  national  subscribership  of  28.2%  will  increase  by  0.73%  to  28.9%.  180 


 46.  Comcasts  net  gain  of  680,000  attributable  subscribers  will  result  from  the  acquisition  of  certain  Adelphia  systems,  followed  by  the  acquisition  of  systems  from  Time  Warner  and  the  transfer  of 
 systems  from  Comcast  to  Time  Warner,  including  systems  acquired  by  Comcast  from  Adelphia.  Specifically,  Comcast  will  acquire  138,000  subscribers  from  Adelphia  that  were  not  previously 
 attributable  to  Comcast.  181  Comcast  also  will  acquire  100%  ownership  of  the  Adelphia/  Comcast  Joint  Ventures,  which  operate  cable  systems  serving  approximately  1,082,  138  subscribers.  182  These 
 subscribers,  however,  are  currently  attributable  to  Comcast  and  therefore  are  included  in  Comcasts  pre-transaction  total  of  26,100,352  subscribers.  183  From  Time  Warner,  Comcast  will  acquire  cable  systems 
 serving  2,740,  000  subscribers.  184  Comcast  will  transfer  to  Time  Warner  systems  serving  2,198,000  subscribers,  including  the  Adelphia/  Comcast  Joint  Venture  systems.  185 


 175  We  examine  compliance  with  these  rules  because  the  transfer  of  cable  systems  from  one  entity  to  another  is  more 
 likely  to  affect  compliance  with  these  rules  than  with  the  Commissions  other  rules.  In  addition,  the  Applicants  and/  or  other  parties  asserted  claims  regarding  compliance  with  these  particular  rules. 


 176  Public  Interest  Statement  at  72-  75.  See  also  FFBC  Comments  at  5-  6  (supporting  the  Applicants  claim). 
 177  Public  Interest  Statement  at  73-  74. 
 178  Id.  This  total  does  not  include  Comcasts  ownership  interests  in  TWE  and  Time  Warner.  Those  interests  are  not 
 attributable  to  Comcast  because  they  are  insulated  through  placements  in  trusts.  See  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23248-  49    4  (2002).  Moreover,  those  interests  will  be  substantially  divested  upon  the  closing  of  the 


 transactions.  Public  Interest  Statement  at  74  n.  187.  See  also  infra  Section  VIII.  B.  4.  179 
 Public  Interest  Statement  at  73-  74.  180 
 Comcast  relies  on  Kagan  Media  Money  for  the  92.  6  million  MVPD  subscriber  total,  citing  the  Commissions  policy  of  accepting  any  published,  current,  and  widely  cited  industry  estimate  of  MVPD  subscribership  when 


 reviewing  compliance  with  the  cable  ownership  limit.  Id.  at  73  n.  186  (citing  Kagan  Media  Money,  April  26,  2005,  at  7).  See  1999  Cable  Ownership  Order,  14  FCC  Rcd  at  19112    35  (1999).  In  their  Reply,  the  Applicants  note 
 that,  since  the  filing  of  their  Applications,  the  Kagan  estimate  of  the  number  of  national  MVPD  subscribers  had  increased  to  approximately  92.  9  million.  Applicants  Reply  at  27  n.  96  (citing  Kagan  Media  Money,  May  24,  2005, 
 at  7).  181 
 Public  Interest  Statement  at  74.  182 
 Id.  183 
 Id.  184 
 Id.  The  cable  systems  that  Time  Warner  will  transfer  to  Comcast  include  certain  systems  that  Time  Warner  will  acquire  from  Adelphia. 


 185  Id.  at  74-  75.  The  change  in  the  number  of  subscribers  will  be  138,000  plus  2,740,000  minus  2,198,000.  Comcast 
 subsequently  provided  updated  figures  in  which  it  said  it  would  receive  from  Adelphia  systems  serving  1,222,423  subscribers,  of  which  1,085,543  subscribers  are  already  attributable  to  Comcast.  Comcast  would  receive  from  Time 


 (continued.) 
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 47.  Time  Warner  asserts  that,  upon  completion  of  the  transactions,  it  will  serve  fewer  than  18%  of  the  nations  MVPD  subscribers.  186  Time  Warner  will  gain  approximately  3.5  million  attributable 
 subscribers,  for  a  total  of  14.4  million  attributable  subscribers  served  by  systems  that  are  owned  or  managed  by  Time  Warner.  187  Bright  House  Networks  manages  an  additional  2.2  million  subscribers  that 
 are  currently  attributable  to  Time  Warner  through  its  interest  in  Time  Warner  Entertainment-Advance/  Newhouse  Partnership.  188  Dividing  the  total  of  16.6  million  attributable  subscribers  by  the 
 Kagan  estimate  of  92.6  million  MVPD  subscribers  results  in  a  post-  transaction  national  subscribership  of  17.9%.  189  Therefore,  Time  Warner  will  remain  within  the  Commissions  30%  limit. 


 48.  Various  parties  question  Comcasts  subscriber  figures  or  assert  that  its  post-  transaction  reach  will  exceed  the  cable  ownership  limit.  None  of  the  parties,  however,  presents  persuasive  evidence  that 
 Comcasts  national  reach  will  exceed  the  limit  as  a  result  of  the  transactions.  Using  a  Commission  2004  figure  for  the  total  number  of  households  served  by  cable  systems,  EchoStar  asserts  that  Comcast  will 
 control  access  to  more  than  35%  of  the  nations  cable  subscribers.  190  For  purposes  of  compliance  with  section  76.503,  however,  the  relevant  measure  is  a  cable  operators  reach  in  terms  of  all  MVPD 
 subscribers,  not  cable  subscribers.  191 
 49.  Free  Press  argues  that  both  Time  Warner  and  Comcast  will  have  national  subscriberships  above  30%  because  all  of  Time  Warners  cable  systems  should  be  attributed  to  Comcast,  and  vice 


 versa.  192  Free  Press  reasons  that  such  cross-  attribution  is  appropriate  because  the  two  companies  have  the  ability  to  control  or  influence  the  programming  decisions  of  iN  DEMAND,  a  limited  partnership  in  which 
 they  both  own  equity.  193  Free  Press  invokes  the  Commissions  rule  that  the  interests  of  a  limited  (Continued  from  previous  page) 
 Warner  systems  serving  1,990,  640  subscribers,  including  systems  Time  Warner  would  receive  from  Adelphia  serving  1,950,  715  subscribers.  In  addition,  pursuant  to  the  TWC  and  TWE  redemption  agreements,  Comcast  would 
 receive  from  Time  Warner  systems  serving  545,981  subscribers  and  150,528  subscribers,  respectively.  Comcast  would  transfer  to  Time  Warner  systems  serving  2,190,429  subscribers,  including  systems  Comcast  would  receive 
 from  Adelphia  serving  1,085,  543  subscribers.  Using  these  figures,  Comcast  would  gain  a  total  of  633,  600  subscribers  not  previously  attributable  to  Comcast,  which  is  slightly  less  than  the  estimate  of  680,  000  subscribers  in 
 the  Public  Interest  Statement.  Comcast  Mar.  30,  2006  Ex  Parte  at  Att.  The  numbers  Comcast  provides  differ  from  the  numbers  Time  Warner  provides  because  they  use  different  counting  methods  and  the  data  are  from  different  time 
 periods.  See  infra  notes  187  and  197.  186 
 Public  Interest  Statement  at  73.  187 
 Id.  Time  Warner  subsequently  provided  updated  figures  in  which  it  said  it  would  receive  from  Adelphia  systems  serving  3,715,603  subscribers.  Time  Warner  would  receive  from  Comcast  systems  serving  2,192,667  subscribers, 


 including  systems  Comcast  would  receive  from  Adelphia  serving  1,085,543  subscribers.  Time  Warner  would  transfer  systems  serving  2,002,680  subscribers  to  Comcast,  including  systems  Time  Warner  would  receive  from 
 Adelphia  serving  1,953,  293  subscribers.  In  addition,  pursuant  to  the  TWC  and  TWE  redemption  agreements,  Time  Warner  would  transfer  to  Comcast  systems  serving  585,  220  subscribers  and  164,  561  subscribers,  respectively. 
 Using  these  figures,  the  Time  Warners  net  gain  would  be  3,155,809  subscribers.  Time  Warner  explains  that  the  lower  total  is  the  result  of  the  different  counting  methods  the  Applicants  use  and  different  subscriber  reporting 
 periods  from  the  figures  used  in  the  Public  Interest  Statement.  Time  Warner  Mar.  23,  2006  Ex  Parte  at  Att.  1;  Time  Warner  Mar.  31,  2006  Ex  Parte  at  Att.;  see  also  infra  note  197. 
 188  Public  Interest  Statement  at  10-  11,  73. 
 189  Id.  at  73. 
 190  EchoStar  Comments  at  11-  12  (citing  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the 
 Delivery  of  Video  Programming,  Eleventh  Annual  Report,  20  FCC  Rcd  2755,  2869  at  Table  B-  1  (2005)  (  Eleventh  Annual  Video  Competition  Report)).  See  also  Florida  Communities  Comments  at  4  (providing  no  evidence  for 


 their  assertion  that  Comcast  will  be  in  violation  of  the  cable  ownership  limit).  191 
 47  C.  F.  R.    76.503(  a).  192 
 Free  Press  Petition  at  33-  35.  193 
 Id. 
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 partnership  are  attributable  to  a  limited  partner  if  that  partner  is  materially  involved  in  the  video  programming  activities  of  the  partnership.  194  Free  Press,  however,  misunderstands  the  application  of  the 
 rule.  First,  Free  Press  does  not  assert  that  any  subscribers  are  attributable  to  iN  DEMAND  because  of  any  ownership  interests  iN  DEMAND  has  in  an  MVPD.  Second,  where  a  partner  has  an  attributable  interest 
 in  a  media  entity,  the  Commission  attributes  to  that  partner  all  of  the  media  interests  held  by  that  entity.  It  does  not,  however,  attribute  to  that  partner,  without  more,  all  of  the  interests  held  by  other  partners  in  the 
 entity.  Free  Press  has  cited  no  basis  under  our  attribution  rules  or  precedent  for  its  assertion.  As  we  have  noted,  the  attribution  rules  identify  what  types  of  ownership  interests  or  other  relationships  are  sufficient 
 that  two  legally  separate  entities  should  be  treated  as  if  they  were  commonly  owned  or  managed  or  subject  to  significant  common  influence.  195  Free  Press  has  not  indicated  how  Time  Warners  interest  in 
 iN  DEMAND  gives  it  significant  influence  over  or  control  of  Comcast  or  how  Comcast's  interest  in  iN  DEMAND  gives  it  significant  influence  over  or  control  of  Time  Warner  such  that  Time  Warners  systems 
 should  be  attributed  to  Comcast  or  Comcasts  systems  should  be  attributed  to  Time  Warner.  Thus,  if  iN  DEMAND  had  any  ownership  interests  in  an  MVPD,  they  would  be  attributable  to  Time  Warner  and  to 
 Comcast,  but  Time  Warners  and  Comcasts  attributable  interests  in  iN  DEMAND,  without  more,  do  not  result  in  their  cable  systems  being  attributed  to  each  other. 


 50.  Free  Press  asserts  that,  based  on  information  provided  shortly  after  the  Applications  were  filed,  Comcast  may  significantly  undercount  subscribers,  because  Comcast  rounded  its  numbers  to  the 
 nearest  thousand  and,  for  several  markets,  provided  post-  transaction  numbers  that  were  smaller  than  the  pre-  transaction  numbers  provided  by  the  Applicant  transferring  its  system  in  those  markets.  196  However, 
 in  verifying  Comcasts  subscriber  totals,  we  have  relied  on  the  more  precise  data  that  Comcast  furnished  under  the  protective  order,  and  we  have  resolved  the  discrepancies  for  those  DMAs  where  the  pre-  and 
 post-  transaction  numbers  did  not  match.  197 
 194  47  C.  F.  R.    76.503  Note  2(  b). 
 195  Review  of  the  Commission's  Cable  Attribution  Rules,  14  FCC  Rcd  19014,  19016    2  (1999)  (  Cable  Attribution 
 Order).  196 
 Free  Press  Petition  at  35,  Rose  Decl.  at  15-  16.  Free  Press  is  referring  to  the  Applicants  filing  on  June  21,  2005,  which  provides  pre-  and  post-  transaction  subscriber  information  by  DMA  for  Time  Warner  and  Comcast.  See  Letter 


 from  Arthur  H.  Harding,  Fleischman  and  Walsh,  L.  L.  P,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (June  21,  2005)  (  Applicants  June  21,  2005  Ex  Parte)  at  Att.  (Comcast  Subscribers    Current  and 
 Post  Adelphia/  Time  Warner  Transactions).  In  that  document,  Comcasts  totals  for  the  numbers  of  subscribers  gained  in  each  market  are  rounded  to  the  nearest  thousand,  and  the  post-  transaction  subscriber  counts  for  a  few 
 DMAs  do  not  match  the  pre-  transaction  counts  for  those  DMAs.  197 
 For  example,  Free  Press  notes  that  Time  Warner  says  it  is  losing  202,472  subscribers  in  the  Minneapolis-  St.  Paul  DMA,  but  Comcast  states  that  it  is  gaining  only  193,  000  subscribers  there.  Free  Press  Petition  at  35.  We  examined 


 this  and  other  similar  discrepancies  in  the  June  21  filing.  We  discovered  that  the  discrepancies  in  pre-  and  post-transaction  numbers  are  explained  by  the  fact  that  Time  Warner  and  Comcast  use  different  methods  of  counting 
 subscribers  in  bulk  accounts  for  multiple  dwelling  units  (  MDUs).  Comcast  uses  the  equivalent  billing  unit  (  EBU)  approach.  Under  this  approach,  the  number  of  subscribers  is  determined  by  dividing  the  total  revenue  from 
 an  MDU  by  the  service  rate  for  the  tier  of  service  provided  to  the  MDU.  Thus,  if  Comcast  provides  an  MDU  expanded  basic  cable  service  for  a  monthly  fee  of  $1,  000.  00,  and  the  standard  residential  rate  for  expanded  basic 
 cable  service  is  $40.00,  the  MDU  would  be  deemed  by  Comcast  to  comprise  25  basic  subscribers.  See  Comcast  Dec.  22,  2005  Response  to  Information  Request  II.  B.  2.  a.  Under  the  occupiable  dwelling  unit  (  ODU  or  kitchen) 
 methodology  used  by  Time  Warner,  subscribers  in  the  MDU  generally  are  determined  based  on  the  total  number  of  separate  dwelling  units  in  the  MDU.  For  example,  if  the  MDU  has  30  separate  apartment  units,  the  MDU  generally 
 is  considered  to  have  30  basic  subscribers  under  the  ODU  method.  See  Comcast  Dec.  22,  2005  Response  to  Information  Request  II.  B.  2.  a.;  see  also  Letter  from  Arthur  H.  Harding,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for 
 Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Dec.  12,  2005)  at  2;  Letter  from  Arthur  H.  Harding,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Feb.  2,  2006) 
 at  1.  Because  the  EBU  calculation  uses  the  bulk  rate  charged  to  an  MDU  owner,  the  EBU  method  may  derive  a  lower  subscriber  figure  than  the  ODU  method. 
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 51.  Our  calculations  of  Comcasts  post-  transaction  national  subscribership  are  based  on  data  the  Applicants  provided  at  the  system  level  for  June  2005.  Our  calculations  comport  with  Comcasts  post-transaction 
 estimate  of  approximately  26,  780,352  attributable  subscribers.  198  We  accept  Comcasts  use  of  Kagan  as  a  source  of  information  on  MVPD  subscribership  and  find  that  the  Kagan  figure  the  Applicants 
 cite  constitutes  an  acceptable  industry  estimate.  We  note,  however,  that  the  figure  of  92.6  million  MVPD  subscribers  included  in  the  Public  Interest  Statement  has  been  superseded  by  more  recent  estimates. 
 Using  Kagans  estimate  for  the  time  period  during  which  Comcasts  subscriber  figures  were  collected,  we  find  that  Comcast  would  have  a  national  subscribership  of  28.7%  of  U.  S.  MVPD  subscribers  as  a  result  of 
 the  transactions.  199 
 52.  As  discussed  above,  the  Commission  currently  is  re-  examining  its  cable  ownership  rule.  200  Upon  resolution  of  that  proceeding,  the  Commission  will  either  affirm  the  30%  limit  or  adopt  a  new  limit. 


 If  the  Commission  adopts  a  new  limit,  the  Applicants  will  be  expected  to  come  into  compliance  with  that  new  limit.  In  this  regard,  Time  Warner  and  Comcast  have  expressed  their  willingness  to  take  all  steps 
 necessary  to  adhere  to  any  new  cable  ownership  limit  that  we  may  ultimately  adopt.  201 
 B.  Other  Cable  Ownership  Rules 
 53.  The  Applicants  provide  adequate  assurances  that  they  will  comply  with  all  other  Commission  cable  ownership  rules.  We  discuss  these  rules  below. 


 198  Comcasts  calculation  of  26,  780,  352  subscribers  was  based  on  subscriber  data  that  was  current  as  of  March  2005 
 for  its  wholly-  owned  systems  and  for  one  of  its  attributable  systems,  and  on  subscriber  data  that  was  current  as  of  January  2005  for  the  remainder  of  its  attributable  systems.  See  Public  Interest  Statement  at  73-  74  n.  186  and  Ex.  Z. 


 Our  calculations,  which  were  based  on  June  2005  data,  resulted  in  a  total  that  was  slightly  less  than  Comcasts  total,  but  for  purposes  of  calculating  Comcasts  national  reach,  we  will  use  the  figure  Comcast  provided  in  the  Public 
 Interest  Statement.  Our  calculations  include  the  226,117  subscribers  that  subscribe  to  the  cable  systems  formerly  owned  by  Susquehanna  Cable  Company.  Comcast  previously  owned  an  approximately  30%  equity  interest  in 
 Susquehanna  Cable  Company  and  its  subsidiaries  but  recently  acquired  100%  ownership  of  the  Susquehanna  systems.  See  Public  Notice,  Rep.  No.  4035  (Apr.  26,  2006)  (assignment  of  authorization  of  CAR-  20051221AN-  08 
 granted  on  April  13,  2006);  see  also  infra  Section  X.  B.  199 
 The  Applicants  used  Kagan  data  available  as  of  April  26,  2005,  which  estimated  92.  6  million  MVPD  subscribers.  As  stated  above,  we  based  our  calculations  on  system-  level  subscriber  information  that  was  current  as  of  June  2005. 


 Kagan  estimates  that  as  of  June  2005  there  were  93.  3  million  MVPD  subscribers  nationwide.  Kagan  Media  Money,  July  26,  2005,  at  6.  The  Commissions  most  recent  annual  report  on  the  status  of  video  competition  found  that,  as  of 
 June  2005,  there  were  approximately  94.2  million  MVPD  subscribers  nationwide.  Using  the  Commissions  figure  for  June  2005  would  result  in  a  post-  transaction  national  subscribership  of  28.  4%.  Twelfth  Annual  Video 
 Competition  Report,  21  FCC  Rcd  at  2617-  18  App.  B,  Table  B-  1.  On  December  20,  2005,  pursuant  to  the  certification  requirements  of  Commission  rule  76.  503(  g),  Comcast  notified  the  Commission  that  it  was  attributed 
 with  approximately  26,252,586  subscribers,  including  the  Susquehanna  Cable  Company  subscribers.  Letter  from  Peter  H.  Feinberg,  Associate  General  Counsel,  Comcast,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Dec.  20,  2005). 
 When  the  approximately  680,000  subscribers  Comcast  intends  to  acquire  as  a  result  of  the  transactions  are  added  to  this  more  recent  Comcast  figure,  Comcasts  post-  transaction  total  would  be  26,  932,  586  attributable  subscribers. 
 Using  this  post-  transaction  total  of  26,  932,  586  attributable  subscribers  and  Kagans  estimate  that  there  were  94.2  million  MVPD  subscribers  as  of  December  2005,  Comcasts  national  reach  post-  transaction  would  be  28.6%. 
 KAGAN  CABLE  TV  INVESTOR:  Deals  &  Finance,  Jan.  31,  2006,  at  3.  200 
 See  Cable  Ownership  Second  Further  Notice,  20  FCC  Rcd  at  9385.  201 
 Public  Interest  Statement  at  73  n.  184.  As  noted  above,  the  license  transfers  approved  herein  must  be  consummated  and  notification  provided  to  the  Commission  within  60  days  of  public  notice  of  approval  pursuant  to 


 Commission  rule  78.  35(  e).  See  supra  note  121.  If  the  Applicants  are  unable  to  consummate  any  of  the  license  transfers  contained  in  the  Applications  consistent  with  this  requirement,  they  must  so  notify  the  Commission.  If 
 failure  to  consummate  would  cause  Comcast  or  Time  Warner  to  violate  any  Commission  rule,  they  must  remedy  the  violation. 
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 54.  Limits  on  Carriage  of  Vertically  Integrated  Programming.  Section  76.504  of  the  Commissions  rules  prohibits  a  cable  operator  from  carrying  affiliated  programming  networks  on  more 
 than  40%  of  its  activated  channels.  The  rule  does  not  apply  to  channel  capacity  in  excess  of  75  channels.  202  The  Applicants  state  that  Time  Warner  and  Comcast  will  remain  in  compliance  with  section 
 76.504  following  the  transactions.  203  The  Applicants  note  that  the  transactions  will  not  involve  the  acquisition  of  any  attributable  interests  in  national  or  regional  programming  networks  from  Adelphia,  and 
 the  agreements  between  Comcast  and  Time  Warner  will  not  involve  the  exchange  of  any  interests  in  national  or  regional  programming  networks.  204  Time  Warner  and  Comcast  have  submitted  signed 
 affidavits  certifying  that  the  transactions  will  not  result  in  any  violation  of  the  channel  occupancy  limit.  205  Both  affidavits  state,  however,  that  the  companies  are  still  reviewing  the  channel  line-  ups  of  the  cable 
 systems  to  be  acquired  and  compiling  the  line-  ups  to  be  implemented  after  the  transactions  are  consummated.  Therefore,  we  require  that,  within  90  days  after  consummation  of  the  transactions,  Time 
 Warner  and  Comcast  each  provide  to  the  Commission  another  affidavit  signed  by  a  competent  officer  of  the  company  certifying  without  qualification  that  the  company  is  in  compliance  with  the  requirements  of 
 section  76.504.  The  merged  entities  also  must  comply  with  any  revisions  that  the  Commission  may  make  to  the  channel  occupancy  limit,  which  has  been  remanded  by  the  D.  C.  Circuit.  206 


 55.  Cable/  SMATV  Cross-  Ownership  Rule.  Section  76.501  of  the  Commissions  rules  prohibits  cable  operators  from  offering  satellite  master  antenna  television  (  SMATV)  service  separate  and  apart 
 from  any  franchised  cable  service  in  any  portion  of  a  franchise  area  served  by  the  cable  operator  or  its  affiliates,  unless  the  service  is  offered  in  accordance  with  the  terms  of  a  cable  franchise  agreement.  207 
 The  Applicants  acknowledge  that  some  of  the  Adelphia  properties  to  be  acquired  may  include  a  small  number  of  SMATV  systems.  208  The  Applicants  state  that  they  will  take  immediate  steps  to  integrate 
 any  such  SMATV  systems  that  may  fall  within  any  Comcast  or  Time  Warner  franchise  area  into  their  respective  cable  distribution  systems  and  will  offer  any  cable  service  provided  over  such  facilities  in 
 accordance  with  the  terms  and  conditions  of  any  applicable  franchise  agreement.  209  To  ensure  that  Time  Warner  and  Comcast  comply  with  the  requirements  of  section  76.501(  d)  and  (e)  regarding  cable  and 
 SMATV  cross-  ownership,  we  require  that,  within  60  days  of  consummation  of  the  transactions,  Time  Warner  and  Comcast  each  provide  to  the  Commission  an  affidavit  signed  by  a  competent  officer  of  the 
 company  certifying  that  the  requirements  of  section  76.  501(  d)  and  (e)  have  been  satisfied.  210 
 56.  Broadcast  Ownership  Rules  and  Cable/  BRS  Cross-  Ownership  Rule.  Our  rules  impose  various  restrictions  on  the  ownership  of  radio  and  television  stations.  211  In  addition,  cable  operators  are 


 prohibited  from  providing  broadband  radio  service  (  BRS)  within  any  portions  of  their  franchise  areas 


 202  47  C.  F.  R.    76.504. 
 203  Public  Interest  Statement  at  75. 
 204  Id.  Time  Warner  will  acquire  certain  de  minimis  and  non-  attributable  programming  interests  from  Adelphia. 
 205  See  Comcast  Dec.  22,  2005  Response  to  Information  Request  V.  B.;  Time  Warner  Dec.  19,  2005  Response  to 
 Information  Request  V.  B.  206 
 Time  Warner  II,  240  F.  3d  at  1137-  39.  207 
 47  C.  F.  R.    76.501(  d)-(  f).  The  rule  does  not  apply  if  the  cable  operator  is  subject  to  effective  competition  or  if  the  SMATV  system  was  owned,  operated,  controlled  by,  or  under  common  control  with  the  cable  operator  as  of 


 October  5,  1992.  47  C.  F.  R.    76.  501(  e)(  1),  (f).  208 
 Public  Interest  Statement  at  76.  209 
 Id.  210 
 Cf.  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23310,  23331  (requiring  compliance  with  the  cable/  SMATV  cross-ownership  rule  as  of  closing). 


 211  47  C.  F.  R.    73.3555. 
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 they  actually  serve  if  they  use  the  BRS  station  as  an  MVPD.  212  The  Applicants  state  that  neither  Time  Warner  nor  Comcast  expects  to  own  any  attributable  interest  in  any  broadcast  television  or  radio  station 
 or  in  any  BRS  station  that  post-  transaction  would  implicate  the  broadcast  ownership  restrictions  or  the  cable/  BRS  cross-  ownership  rule.  213 


 57.  Prohibition  on  Buy-  Outs.  Section  76.505(  a)  of  the  Commissions  rules  prohibits  local  exchange  carriers  (  LECs)  or  their  affiliates  from  acquiring  more  than  a  10%  financial  interest,  or  any 
 management  interest,  in  a  cable  operator  that  provides  cable  service  within  the  LECs  telephone  service  area.  214  Section  76.505(  e)  defines  a  LECs  telephone  service  area  as  an  area  in  which  the  LEC  provided 
 telephone  exchange  service  as  of  January  1,  1993.  215  The  Applicants  assert  that  none  of  them  provided  telephone  exchange  service  as  of  January  1,  1993,  and,  thus,  none  has  a  telephone  service  area  as 
 defined  by  section  76.505(  e)  of  the  Commissions  rules.  216 
 58.  Section  76.505(  b)  of  the  Commissions  rules  prohibits  a  cable  operator  or  its  affiliates  from  acquiring  more  than  a  10%  financial  interest,  or  any  management  interest,  in  a  LEC  providing  telephone 


 exchange  service  within  the  cable  operators  franchise  area.  217  The  Applicants  state  that  neither  Time  Warner  nor  Comcast  owns  a  financial  interest  of  greater  than  10%  or  has  any  management  interest  in  a 
 LEC  providing  telephone  exchange  service  within  any  of  the  franchise  areas  of  the  systems  they  are  acquiring  pursuant  to  the  transactions.  218 


 VI.  ANALYSIS  OF  POTENTIAL  HARMS  IN  THE  RELEVANT  MARKETS 
 A.  Relevant  Markets 
 59.  In  general,  competition  depends  on  having  choices  among  products  that  are  close  substitutes  for  one  other.  If  consumers  have  such  choices,  a  single  provider  cannot  raise  its  prices  above  the 


 competitive  level  because  consumers  will  switch  to  a  substitute.  The  level  of  competition  depends  on  what  products  are  substitutes  (product  market),  where  those  substitute  products  are  available  (geographic 
 market),  what  firms  produce  them  (market  participants),  and  what  other  firms  might  be  able  to  produce  substitutes  if  the  price  were  to  rise  (market  entrants).  To  evaluate  the  impact  of  proposed  transactions  on 
 competition,  we  examine  the  characteristics  of  competition  in  the  relevant  product  and  geographic  markets  and  determine  the  impact  of  the  transactions  on  market  participants  and  potential  entrants. 
 Transactions  raise  competitive  concerns  when  they  reduce  the  availability  of  substitute  choices  (i.  e.,  increase  market  concentration)  to  the  point  that  the  acquiring  firm  has  a  significant  incentive  and  ability  to 
 engage  in  anticompetitive  actions  such  as  raising  prices  or  reducing  output.  Economic  theory  describes  both  how  such  anticompetitive  actions  can  harm  consumers  and  how  the  magnitude  of  the  harm  can  be 
 measured. 


 212  47  C.  F.  R.    27.1202. 
 213  Public  Interest  Statement  at  76.  See  47  C.  F.  R.    27.  1202,  73.  3555.  Instead  of  BRS,  the  Applicants  refer  to 
 multichannel  multipoint  distribution  service  (  MMDS).  MMDS,  also  known  as  MDS,  has  been  renamed  the  broadband  radio  service  (  BRS),  and  the  Commission  has  made  a  number  of  changes  to  the  rules  governing  the 


 band.  See  Amendment  of  Parts  1,  21,  73,  74  and  101  of  the  Commission's  Rules  to  Facilitate  the  Provision  of  Fixed  and  Mobile  Broadband  Access,  Educational  and  Other  Advanced  Services  in  the  2150-  2162  and  2500-  2690  MHz 
 Bands,  19  FCC  Rcd  14165  (2004).  214 
 47  C.  F.  R.    76.505(  a).  215 
 47  C.  F.  R.    76.505(  e).  If  the  telephone  exchange  service  facilities  were  transferred  after  January  1,  1993,  the  area  served  by  those  facilities  is  considered  part  of  the  telephone  service  area  of  the  acquiring  common  carrier,  not 


 the  selling  common  carrier.  216 
 Public  Interest  Statement  at  76-  77.  217 
 47  C.  F.  R.    76.505(  b).  218 
 Public  Interest  Statement  at  77. 
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 60.  In  analyzing  MVPD  transactions,  the  Commission  has  generally  examined  two  separate  but  related  product  markets:  (1)  the  distribution  of  programming  to  consumers  (  the  distribution  market)  and 
 (2)  the  acquisition  of  programming  (  the  programming  market).  219  The  Applicants  are  significant  participants  in  both  of  these  product  markets,  and  we  therefore  analyze  the  markets  below.  Specifically, 
 we  examine  whether  the  transactions  are  likely  to  contravene  Commission  policy  goals  by  analyzing  the  potential  effects  the  transactions  may  have  on  MVPD  competition  and  on  the  flow  of  video  programming 
 to  consumers.  220 
 1.  MVPD  Services 
 a.  Product  Market 
 61.  MVPDs  include  cable  operators,  direct  broadcast  satellite  (  DBS)  providers,  and  overbuilders.  221  MVPDs  bundle  programming  networks  into  groups  of  channels  or  tiers  and  sell  this 


 programming  to  consumers,  deriving  revenues  from  subscription  fees  and  the  sale  of  advertising  time  that  they  receive  through  their  carriage  agreements.  MVPDs  sometimes  seek  exclusive  access  to  certain 
 programming  to  ensure  that  their  direct  competitors  are  unable  to  offer  it  to  their  subscribers.  222 
 62.  CWA/  IBEW  argue  that  DBS  and  cable  are  not  part  of  the  same  product  market.  223  They  cite  various  papers  and  reports  that  conclude  that  high  switching  costs  limit  substitution  between  the  two 


 services,  224  that  only  the  presence  of  second  cable  operators  will  result  in  significant  cable  price  decreases,  225  and  that  DBS  is  a  substitute  for  premium  cable  service,  but  not  for  the  type  of  cable  service 
 that  most  subscribers  use.  226  In  addition,  they  note  that  because  DBS  does  not  offer  voice  telephony  or  high-  speed  Internet  access,  it  cannot  offer  the  triple  play  bundle  of  services  consumers  are  seeking.  227 
 Finally,  CWA/  IBEW  argue  that  DBS  is  disadvantaged  by  other  barriers  to  competitive  entry,  including 
 219  See,  e.  g.,  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  500    51. 
 220  As  noted  supra  in  Section  IV,  these  goals  are  embodied  in  various  statutory  provisions,  including    613(  f),  616, 
 and  628  of  the  1992  Act.  221 
 The  term  overbuilders  refers  to  MVPDs,  other  than  DBS  providers,  that  compete  against  cable  incumbents  in  their  local  franchise  areas  and  includes  wireless  cable  operators,  SMATV  providers  and  second  cable  operators 


 such  as  broadband  service  providers,  electric  utilities  or  telephone  companies  that  offer  wireline  video  distribution  service. 
 222  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23257-  58    33;  see  also  Cable  Ownership  Second  Further  Notice,  20  FCC 
 Rcd  at  9412-  13    67-  70  (discussing  and  requesting  comment  on  the  Commissions  definition  of  the  programming  market). 


 223  CWA/  IBEW  Petition  at  6-  7. 
 224  Id.  at  6-  7  (citing  Andrew  S.  Wise  and  Kiran  Duwadi,  Competition  Between  Cable  and  Direct  Broadcast  Satellite 
 --  Its  More  Complicated  Than  You  Think,  FCC  MB  Staff  Research  Paper  and  IB  Working  Paper  at  5  (Jan.  20,  2005)  (  Wise  and  Duwadi));  Douglas  Shapiro,  What  Changed  in  the  Cable-  DBS  Dynamic  in  2Q?,  Bank  of  America 


 Securities,  Aug.  27,  2004).  225 
 CWA/  IBEW  Petition  at  6  (citing  Report  on  Cable  Industry  Prices,  20  FCC  Rcd  2718  (2005)  (  2004  Cable  Price  Report);  and  General  Accounting  Office  (  GAO),  The  Effect  of  Competition  from  Satellite  Providers, 


 GAO/  RCED-  00-  164,  July  2000).  226 
 Id.  at  6-  7  (citing  Wise  and  Duwadi  at  20);  A.  Goolsbee  and  A.  Petrin,  The  Consumer  Gains  from  Direct  Broadcast  Satellites  and  Competition  with  Cable  TV,  ECONOMETRICA,  72:  351-  381;  S.  J.  Savage  and  M.  Wirth,  Price, 


 Programming,  and  Potential  Competition  in  U.  S.  Cable  Television  Markets,  JOURNAL  OF  REGULATORY  ECONOMICS,  27(  1):  25-  46;  Jerry  Hausman,  App.  A  to  Petition  of  SBC  Communications  to  Deny  the  Applications  for  Consent  to 
 Transfer  of  Control  of  MediaOne  Group,  Inc.,  Transferor  to  AT&  T  Corp.,  Transferee;  Mark  Cooper,  Cable  Mergers  and  Media  Monopolies:  Market  Power  in  Digital  Media  and  Communications  Networks,  Economic  Policy  Institute, 
 Washington,  D.  C.  (2002)  at  22-  24.  227 
 CWA/  IBEW  Petition  at  7. 
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 cable  operators  exclusive  access  to  programming  and  satellite  providers  limited  access  to  multiple  dwelling  units.  228 
 63.  In  past  transaction  reviews,  in  analyzing  possible  effects  of  the  proposed  transaction  on  the  distribution  of  video  programming,  the  Commission  has  found  that  the  relevant  product  market  is  all 
 MVPD  services.  229  This  approach  also  is  consistent  with  the  Commissions  traditional  delineation  of  the  product  market  for  cable  services.  230  Therefore,  consistent  with  applicable  Commission  precedent,  we 
 find  that  the  relevant  product  market  for  evaluating  the  proposed  transactions  is  multichannel  video  programming  service  distributed  by  all  MVPDs.  231 


 b.  Geographic  Market 
 64.  In  the  past,  the  Commission  has  concluded  that  the  relevant  geographic  market  for  MVPD  services  is  local  because  consumers  make  decisions  based  on  the  MVPD  choices  available  to  them  at  their 


 residences  and  are  unlikely  to  change  residences  to  avoid  a  small  but  significant  increase  in  the  price  of  MVPD  service.  232  In  order  to  simplify  the  analysis,  the  Commission  has  aggregated  consumers  that  face 
 the  same  choice  in  MVPD  products  into  larger  relevant  geographic  markets.  233  We  find  it  appropriate  to  continue  this  approach  here.  Because  the  major  MVPD  competitors  in  most  areas  are  the  local  cable 
 operator  and  the  two  DBS  providers,  and  consistent  with  the  Commissions  approach  in  prior  license  transfer  proceedings,  we  find  that  the  franchise  area  of  the  local  cable  operator  is  the  relevant  geographic 
 market  for  purposes  of  this  analysis. 
 2.  Video  Programming 
 a.  Product  Market 
 65.  Companies  that  own  cable  programming  networks  both  produce  their  own  programming  and  acquire  programming  produced  by  others.  They  package  and  sell  this  programming  as  a  network  or 


 networks  to  MVPDs  for  distribution  to  consumers.  234  To  provide  multichannel  video  services  to  subscribers,  MVPDs  combine  cable  programming  networks  and  broadcast  television  signals  with 
 distribution  on  their  cable,  satellite,  or  wireless  distribution  networks.  235  Owners  of  cable  programming  networks  are  compensated  in  part  through  license  fees  that  are  based  on  the  number  of  subscribers  served 
 by  the  MVPDs  that  carry  the  networks.  These  license  fees  are  negotiated  based  on  rate  cards  236  that  specify  a  top  fee,  but  substantial  discounts  are  negotiated  based  on  the  number  of  MVPD  subscribers  and 
 on  other  factors,  such  as  placement  of  the  network  on  a  particular  programming  tier.  237  Most  cable 


 228  Id.  at  8. 
 229  See,  e.  g.,  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23281-  82    89. 
 230  See  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video  Programming,  First 
 Report,  9  FCC  Rcd  7442,  7467    49-  50  (1994)  (  First  Annual  Video  Competition  Report).  231 
 See  AOL-  Time  Warner  Order,  16  FCC  Rcd  at  6647    244-  45;  AT&  T-  TCI  Order,  14  FCC  Rcd  at  3172    21.  232 
 See  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  505    62;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23282    90;  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20610    119. 


 233  See  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  505    62. 
 234  Id.  at  502    54;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23258    34;  see  also  Cable  Ownership  Second  Further 
 Notice,  20  FCC  Rcd  at  9411-  2    65-  66.  235 
 News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  502    54;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23258    34;  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20653    248. 


 236  Such  rate  cards  are  not  publicly  available. 
 237  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20654    249  (citing  Cable  Ownership  Further  Notice,  16  FCC  Rcd  at 
 17322    10-  11);  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  502    55. 
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 programming  networks  and  MVPDs  also  derive  revenue  by  selling  advertising  time  during  the  programming.  238 
 66.  We  find  that  markets  that  include  video  programming  are  classic  differentiated  product  markets.  239  Video  programming  differs  significantly  in  terms  of  characteristics,  focus,  and  subject  matter. 
 Programming  is  offered  by  over-  the-  air  broadcast  stations;  national  cable  networks,  including  news,  entertainment  and  hobby  networks;  and  various  regional  networks,  including,  in  particular,  regional  sports 
 networks.  240  Among  cable  programming  networks,  some  offer  programming  of  broad  interest  and  depend  on  a  large,  nationwide  audience  for  profitability;  others  also  seek  large  nationwide  audiences  but  offer 
 content  that  is  more  focused  in  subject;  and  yet  others  seek  nationwide  distribution,  but  offer  narrowly  tailored  programming,  focusing  on  a  niche  within  a  niche.  241  Some  cable  programming  networks  do 
 not  seek  a  national  audience  but  are  regional  or  even  local  in  scope,  including  regional  sports  and  local  or  regional  news  networks.  242  We  have  previously  found  that  at  least  a  certain  proportion  of  MVPD 
 subscribers  view  certain  types  of  programming  as  so  vital  or  desirable  that  they  are  willing  to  change  MVPD  providers  in  order  to  gain  or  retain  access  to  that  programming.  243 


 67.  Nothing  in  the  record  suggests  a  need  for  us  to  define  rigorously  all  the  possible  relevant  product  markets  for  video  programming  networks.  For  purposes  of  our  analysis,  we  will  separate  the 
 video  programming  products  offered  by  Comcast  and  Time  Warner  into  two  broad  categories:  (1)  national  cable  programming  networks  and  (2)  regional  cable  networks,  particularly  regional  sports 
 networks. 
 b.  Geographic  Market 
 68.  We  have  found  it  reasonable  to  approximate  the  relevant  geographic  market  for  video  programming  by  looking  to  the  area  in  which  the  program  owner  is  licensing  the  programming.  244  For 


 national  cable  programming  networks,  the  relevant  geographic  market  therefore  is  at  least  national  in  scope.  Such  networks  are  generally  licensed  to  MVPDs  nationwide,  and,  in  some  cases,  they  are  licensed 
 internationally.  In  contrast,  with  respect  to  regional  sports  networks  (  RSNs)  and  other  regional  networks,  we  conclude,  as  we  did  in  the  Comcast-  AT&  T  and  News  Corp.-  Hughes  transactions,  that  the 
 relevant  geographic  market  is  regional.  245  In  general,  contracts  between  sports  teams  and  RSNs  limit  the  distribution  of  the  content  to  a  specific  distribution  footprint,  usually  the  area  in  which  there  is 


 238  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20654    249  (citing  Cable  Ownership  Further  Notice,  16  FCC  Rcd  at 
 17322    10-  11);  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  502    55.  239 
 Differentiated  products  are  products  whose  characteristics  differ  and  which  are  viewed  as  imperfect  substitutes  by  consumers.  See  Dennis  W.  Carlton  and  Jeffrey  M.  Perloff,  MODERN  INDUSTRIAL  ORGANIZATION  281  (2d  ed. 


 1991)  (  Carlton  and  Perloff).  240 
 News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  504    59.  241 
 EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20654    250  (citing  Cable  Ownership  Further  Notice,  16  FCC  Rcd  at  17322-  23).  Examples  of  the  first  type  of  programming  include  TNT  and  USA;  examples  of  the  second  type  include 


 ESPN  for  sports  and  CNN  for  news;  and  examples  of  this  third  type  of  programming  include  Discovery  Health,  the  Golf  Network,  and  Home  and  Garden  TV.  Id.;  see  also  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  503    57. 
 242  Some  cable  programming  networks  likely  can  survive  with  distribution  to  a  few  million  subscribers  within  a 
 certain  region,  while  others  may  need  nationwide  distribution  in  order  to  remain  viable.  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  503    57;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23258    35;  EchoStar-  DIRECTV  HDO,  17  FCC 


 Rcd  at  20654    250  (citing  Cable  Ownership  Further  Notice,  16  FCC  Rcd  at  17323).  243 
 See  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  633,  App.  D.  244 
 Id.  at  506    64.  245 
 Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23267    59-  60;  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  506    66. 
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 significant  demand  for  the  specific  teams  whose  games  are  being  transmitted.  246  MVPD  subscribers  outside  the  footprint  are  unable  to  view  many  of  the  sporting  events  that  are  among  the  most  popular 
 programming  offered  by  RSNs.  We  thus  find  it  reasonable  to  define  the  relevant  geographic  market  for  regional  networks  as  the  distribution  footprint  established  by  the  owner  of  the  programming.  247 


 B.  Introduction  to  Potential  Harms 
 69.  Transactions  involving  the  acquisition  of  a  full  or  partial  interest  in  another  company  may  give  rise  to  concerns  regarding  horizontal  concentration  and/  or  vertical  integration,  depending  on  the 


 lines  of  business  engaged  in  by  the  two  firms.  A  transaction  is  said  to  be  horizontal  when  the  firms  in  the  transaction  sell  or  buy  products  that  are  in  the  same  relevant  product  and  geographic  markets  and  are 
 therefore  viewed  as  reasonable  substitutes.  Horizontal  transactions  can  eliminate  competition  between  the  firms  and  increase  concentration  in  the  relevant  markets.  The  reduction  in  overall  competition  in  the 
 relevant  markets  may  lead  to  substantial  increases  in  prices  paid  by  purchasers  or  decreases  in  prices  paid  to  sellers  of  products  in  the  markets.  The  result  in  either  case  is  that  less  output  is  sold.  248 


 70.  Vertical  transactions  raise  slightly  different  competitive  concerns.  Vertical  relationships  exist  when  upstream  firms  produce  inputs  that  downstream  firms  use  to  create  finished  goods. 
 Transactions  are  said  to  be  vertical  when  upstream  firms  and  downstream  firms  are  combined.  A  merging  of  the  firms,  however,  is  not  required  for  a  vertical  relationship  to  exist.  Exclusive  dealing  arrangements 
 between  upstream  and  downstream  firms,  referred  to  as  vertical  restraints,  can  accomplish  the  objectives  of  vertical  integration.  249 


 71.  At  the  outset,  it  is  important  to  note  that  antitrust  law  and  economic  analysis  have  viewed  vertical  transactions  more  favorably  than  horizontal  transactions  in  part  because  vertical  transactions, 
 standing  alone,  do  not  directly  reduce  the  number  of  competitors  in  either  the  upstream  or  downstream  markets.  250  In  addition,  vertical  transactions  may  generate  significant  efficiencies.  251  Nevertheless,  as 
 discussed  in  greater  detail  below,  vertical  transactions  also  can  have  anticompetitive  effects.  In  particular,  a  vertically  integrated  firm  that  competes  both  in  an  upstream  input  market  and  a  downstream  output 
 market  may  have  the  incentive  and  ability  to  (1)  foreclose  rivals  from  inputs  or  customers  or  (2)  raise  the  costs  to  rivals  generally. 


 72.  As  explained  above,  our  determinations  about  how  the  public  interest  might  be  harmed  or  served  by  the  Applicants  proposal  are  based  on  the  assumption  that  all  of  the  proposed  transactions  will 
 be  consummated  and  would  be  different  if  only  some  of  the  proposed  transactions  were  consummated.  Our  analysis  is  based  on  the  facts  and  evidence  presented  in  the  record,  and  we  consider  the  effects  on  the 
 relevant  markets  and  market  participants  by  comparing  current  competitive  conditions  with  the  competitive  landscape  that  is  likely  to  result  following  the  completion  of  all  of  the  proposed  transactions. 


 246  See,  e.  g.,  DIRECTV,  Blackout  Information,  at  http://  www.  directvsports.  com/  Blackout_  Info  (last  visited  June  19, 
 2006).  247 
 In  Section  VI.  D.  1.  a.,  infra,  we  further  refine  the  geographic  market  for  RSNs  to  account  for  the  particular  characteristics  of  these  products. 


 248  See  1  ABA  Section  of  Antitrust  Law,  Antitrust  Law  Developments  327  (5  th  ed.  2002);  KIP  VISCUSI,  JOHN  M. 
 VERNON  AND  JOSEPH  E.  HARRINGTON,  JR.,  ECONOMICS  OF  REGULATION  AND  ANTITRUST  192  (3d  ed.  2000)  (  VISCUSI,  et  al.). 


 249  See  VISCUSI,  et  al.  at  233. 
 250  In  the  simple  case  where  there  are  two  levels  of  production,  an  upstream  market  is  a  market  for  inputs,  while  a 
 downstream  market  is  a  market  for  end-  user  outputs.  We  will  sometimes  refer  to  the  upstream  and  downstream  markets  as  the  input  and  output  markets. 


 251  VISCUSI,  et  al.  at  219-  221;  Michael  H.  Riordan  and  Steven  Salop,  Evaluating  Vertical  Mergers:  A  Post-  Chicago 
 Approach,  63  ANTITRUST  L.  J.  513,  523-  27  (1995)  (  Riordan  and  Salop);  JEAN  TIROLE,  THE  THEORY  OF  INDUSTRIAL  ORGANIZATION  174-  75  (MIT  Press  1988). 
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 73.  Below,  we  analyze  the  potential  horizontal  and  vertical  effects  of  the  transactions  on  the  markets  for  MVPD  services  and  video  programming.  Where  we  find  that  the  proposed  transactions  are 
 likely  to  result  in  public  interest  harms,  we  also  impose  conditions  that  are  narrowly  targeted  to  address  those  harms. 


 C.  Potential  Horizontal  Harms 
 1.  MVPD  Market 
 74.  Commenters  contend  that  the  horizontal  concentration  resulting  from  the  transactions  would  give  Comcast  and  Time  Warner  market  power  at  the  national  and/  or  regional  levels,  resulting  in  harm  to 


 competition  in  the  MVPD  market.  252  Commenters  assert  that  the  Applicants  horizontal  reach  in  national  and  regional  markets  would  enable  them  to  raise  cable  rates  to  their  subscribers  and  secure  exclusive 
 agreements  with,  or  more  favorable  terms  from,  unaffiliated  programmers.  253  Further,  commenters  assert  that  the  post-  transaction  increased  subscribership  of  Comcast  and  Time  Warner  would  facilitate 
 anticompetitive  practices  vis-  -  vis  second  cable  operators,  adversely  affect  the  local  franchising  process,  and  produce  other  public  interest  harms.  254  We  consider  these  allegations  below,  and  conclude  that  any 
 potential  harms  will  be  adequately  addressed  by  the  conditions  we  impose  in  Section  VI.  D.  1. 
 a.  Potential  Effects  on  MVPD  Competition 
 75.  Positions  of  the  Parties.  Several  commenters/  petitioners  assert  that  the  proposed  transactions  would  lead  to  a  reduction  in  head-  to-  head  competition  in  areas  served  by  Time  Warner  or  Comcast  by 


 deterring  entry  by  overbuilders.  In  support  of  this  claim,  DIRECTV  cites  to  a  study  as  evidence  that  clustering  creates  a  fortress  that  deters  competitive  entry.  255  Free  Press,  CFA/  CU,  and  the  Florida 
 Communities  also  suggest  that  increased  consolidation  would  minimize  competition  from  overbuilders.  256  RCN  notes  that  the  Commission  has  recognized  that  head-  to-  head  competition  benefits  consumers  by 
 spurring  the  incumbent  cable  operator  to  reduce  prices,  provide  additional  programming  at  the  same  monthly  rate,  improve  customer  service,  and  add  new  services.  257  RCN  warns  that  these  benefits  could  be 
 lost  if  Time  Warner  and  Comcast  were  able  to  use  their  enhanced  market  power  to  engage  in  behavior  that  harms  or  deters  competitors  in  the  areas  they  serve.  258  In  analyzing  the  potential  effects  of  the 
 transactions,  Free  Press  examines  the  transfers  of  ownership  within  DMAs,  which  generally  are 
 252  TAC  Petition  at  18-  22,  28-  35;  CWA/  IBEW  Petition  at  8-  20;  Free  Press  Petition  at  6-  11;  TCR  Petition  at  11-  17; 
 CFA/  CU  Reply  Comments  at  7-  11,  32-  41.  253 
 TAC  Petition  at  18-  22,  28-  35;  CWA/  IBEW  Petition  at  8-  20;  Free  Press  Petition  at  6-  11;  TCR  Petition  at  11-  17;  CFA/  CU  Reply  Comments  at  7-  11,  32-  41. 


 254  TAC  Petition  at  18-  22,  28-  35;  CWA/  IBEW  Petition  at  8-  20;  Free  Press  Petition  at  6-  11;  TCR  Petition  at  11-  17; 
 CFA/  CU  Reply  Comments  at  7-  11,  32-  41.  255 
 According  to  DIRECTV,  the  study  concludes  that  an  increase  in  the  size  of  the  cluster  value  for  a  given  area  significantly  decreases  the  likelihood  that  an  overbuilder  enters  that  area.  DIRECTV  Comments  at  29  (citing  Hal  J. 


 Singer,  Does  Clustering  by  Incumbent  Cable  MSOs  Deter  Entry  by  Overbuilders?,  Social  Science  Research  Network,  May  2003,  at  4,  at  http://  ssrn.  com/  abstract=  403720  (last  visited  June  19,  2006)). 
 256  Free  Press  Petition  at  24;  CFA/  CU  Reply  Comments  at  14-  16;  Florida  Communities  Comments  at  5. 
 257  RCN  Comments  at  8-  9;  id.  at  3  (citing  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the 
 Delivery  of  Video  Programming,  Eighth  Annual  Report,  17  FCC  Rcd  1244,  1323    197  (2002)  (  Eighth  Annual  Video  Competition  Report)).  RCN  and  others  note  that  GAO  has  found  that  the  presence  of  an  overbuilder  in  a 


 market  leads  to  significantly  lower  cable  rates.  RCN  Comments  at  3-  5;  DIRECTV  Comments  at  29;  CFA/  CU  Reply  Comments  at  14-  15;  Free  Press  Petition  at  23;  TAC  Petition  at  49-  50.  See,  e.  g.,  GAO  Report:  Issues  Related  to 
 Competition  and  Subscriber  Rates  in  the  Cable  Television  Industry,  GAO-  04-  8  at  3,  App.  IV  (Oct.  2003)  (cable  rates  are  15%  lower  in  markets  where  there  is  competition  from  a  wireline  provider)  (  GAO  Report:  Competition 
 and  Subscriber  Rates).  258 
 RCN  Comments  at  9. 
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 comprised  of  multiple  franchise  areas,  rather  than  the  transfers  of  ownership  within  franchise  areas.  Free  Press  concludes  that  the  transactions  are  intended  to  eliminate  head-  to-  head  competition  between  Time 
 Warner  and  Comcast  in  the  countrys  most  desirable  DMAs.  259 
 76.  Commenters  argue  that  competition  from  DBS  and  other  MVPDs  would  not  constrain  the  anticompetitive  effects  arising  from  increased  horizontal  concentration.  260  They  claim  that  although 


 incumbent  local  exchange  carriers  (  ILECs)  have  announced  plans  to  enter  the  MVPD  market,  they  have  not  done  so.  261  Commenters  cite  various  obstacles  to  ILEC  entry  into  the  MVPD  market,  including  the 
 requirement  to  obtain  numerous  local  franchise  authority  approvals,  262  difficulties  inherent  in  introducing  a  mass-  market  service  using  new  technology,  263  and  the  likelihood  that  the  Applicants  themselves  will 
 impede  ILEC  entry  by  withholding  access  to  affiliated  programming  or  entering  into  exclusive  arrangements  with  unaffiliated  programmers.  264  DIRECTV  states  that,  even  without  such  obstacles,  many 
 of  the  areas  in  which  the  Applicants  will  operate  post-  transaction  are  not  served  by  the  ILECs  that  have  announced  plans  for  a  video  offering.  265 


 77.  Free  Press  and  other  commenters  propose  that  the  Herfindahl-  Hirschman  Index  (HHI)  be  used  to  analyze  the  competitive  effects  of  the  transactions.  266  They  point  to  the  use  of  HHIs  by  the 
 Department  of  Justice  and  the  Federal  Trade  Commission,  following  the  Horizontal  Merger  Guidelines,  to  measure  concentration  in  markets  in  order  to  assess  the  likelihood  that  a  particular  merger  would 
 increase  the  merging  parties  market  power  sufficiently  to  allow  them  to  raise  prices  profitably.  267  These 
 259  Free  Presss  consultant,  Dr.  Gregory  Rose,  calculates  that  the  transactions  will  result  in  an  absence  of  head-  to-head 
 competition  between  Time  Warner  and  Comcast  in  22  of  the  top  40  DMAs,  and  in  119  of  the  210  Nielsen  DMAs.  Free  Press  Petition  at  9,  Rose  Decl.  at  11-  13. 


 260  Free  Press  Petition  at  24-  25;  DIRECTV  Comments  at  30-  33;  CWA/  IBEW  Petition  at  6-  8;  RCN  Comments  at  8-9. 
 Free  Press  states  that  DBS  competition  would  not  constrain  the  Applicants  from  exercising  their  dominant  positions  nationally  or  in  the  top  25  DMAs  and  asserts  that  the  paucity  of  overbuilders  eliminates  them  as  a  serious 


 source  of  competition.  Free  Press  Petition  at  21-  24;  see  also  CFA/  CU  Reply  Comments  at  17-  19;  23-  25  (asserting  that  DBS  is  not  a  full  competitor  to  cable). 
 261  DIRECTV  Comments  at  30;  Free  Press  Petition  at  25  (stating  that  ILEC  buildout  of  video  offering  will  take 
 years  to  achieve  and  may  never  come  to  fruition  at  all);  RCN  Comments  at  8.  262 
 DIRECTV  Comments  at  30  (citing  press  reports  stating  that  it  took  one  ILEC  a  full  year  to  negotiate  six  of  the  10,  000  franchise  agreements  that  it  would  require  in  order  to  offer  MVPD  service  to  its  entire  service  area). 


 263  Id.  (citing  articles  describing  certain  technological  difficulties  faced  by  ILECs  attempting  to  roll  out  a  video 
 offering).  264 
 Id.  at  33-  34  (contending  that  the  obstacles  to  ILEC  entry  will  prevent  them  from  entering  the  marketplace  in  a  manner  sufficient  and  timely  enough  to  counteract  concentration  resulting  from  the  proposed  transactions);  see  also 


 Free  Press  Petition  at  25  (contending  that  potential  telephone  competitors  will  face  the  same  market  power  and  barriers  to  entry  as  traditional  cable  overbuilders). 
 265  DIRECTV  Comments  at  32  (citing  maps  provided  by  the  Applicants). 
 266  Free  Press  Petition  at  4-  5,  Rose  Decl.  at  2-  4;  CWA/  IBEW  Petition  at  8-  9,  App.  A;  DIRECTV  Comments  at  9, 
 Bamberger  &  Neuman  Decl.  at  2;  CFA/  CU  Reply  Comments  at  13;  see  also  Letter  from  Francis  Ackerman,  Assistant  Attorney  General,  Office  of  the  Attorney  General,  State  of  Maine,  to  Chairman  Kevin  Martin  and 


 Commissioners  Kathleen  Q.  Abernathy,  Michael  Copps,  Jonathan  Adelstein,  and  Deborah  Taylor  Tate,  FCC  (Mar.  1,  2006)  (  Maine  Attorney  General  Ex  Parte)  at  3-  4.  The  HHI  is  a  measure  of  concentration  that  takes  account  of 
 the  distribution  of  the  size  of  firms  in  a  market.  A  markets  HHI  is  calculated  by  summing  the  squares  of  the  individual  market  shares  of  all  the  participants.  The  HHI  varies  with  the  number  of  firms  in  a  market  and  the  degree 
 of  inequality  among  firm  size.  Generally,  the  HHI  increases  when  there  are  fewer  and  unequal  sized  firms  in  a  market.  See  Twelfth  Annual  Video  Competition  Report,  20  FCC  Rcd  at  2573-  74    153. 
 267  Free  Press  Petition  at  4-  7,  Rose  Decl.  at  2-  6;  CWA/  IBEW  Petition  at  8-  9;  DIRECTV  Comments  at  9-  10; 
 CFA/  CU  Reply  Comments  at  13-  14,  Ex.  1.  Horizontal  mergers  of  competing  firms  may  raise  antitrust  concerns  because  of  their  direct  and  well-  understood  impact  on  prices,  quantities  sold,  and  consumer  welfare. 
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 commenters  provide  HHI  calculations  for  regional  and  national  markets  based  on  the  market  shares  of  cable  operators  in  each  retail  market.  They  claim  that  the  size  and  change  in  regional  and  national  HHIs 
 calculated  for  the  transactions  are  sufficient  to  raise  competitive  concerns.  268 
 78.  Free  Press  argues  that  even  if  there  is  no  direct  competition  within  a  franchise  area,  consumers  benefit  in  terms  of  service  and  price  when  neighboring  franchise  areas  are  served  by  different 


 cable  operators.  269  Free  Press  reasons  that  cable  operators  are  less  likely  to  raise  prices  or  reduce  service  when  consumers  have  a  readily  available  basis  for  comparison.  270  Noting  that  the  Commission  previously 
 has  endorsed  the  idea  that  the  presence  of  a  benchmark  competitor  reduces  the  likelihood  of  anticompetitive  behavior,  271  Free  Press  suggests  that  the  increases  in  the  HHIs  it  calculated  for  each  of  the 
 top  25  DMAs  demonstrate  that  these  benchmarking  opportunities  would  be  reduced  as  a  result  of  the  transactions.  272  Free  Press  asserts  that  the  presence  of  a  benchmark  competitor  also  benefits 
 programmers  and  local  advertisers.  273 
 79.  The  Applicants  disagree.  They  argue  that  the  magnitude  of  any  effects  on  benchmarking  cannot,  and  should  not,  be  gauged  using  HHI  calculations.  274  In  addition,  they  assert  that  they  face 


 intense  competition  from  overbuilders  and  DBS  providers  and  that  the  major  telephone  companies  soon  will  provide  additional  competitive  pressure.  275  They  also  note  that  the  transactions  would  not  reduce  the 
 number  of  competitive  choices  available  to  MVPD  subscribers,  because  the  Applicants  do  not  currently 


 268  Free  Press  asserts  that  the  national  HHI  would  increase  by  13.  5%  to  1911  for  the  MVPD  market  and  by  15.  8%  to 
 2108  for  the  cable  market.  Free  Press  reasons  that  since  the  guidelines  state  that  an  HHI  of  1800  or  greater  denotes  a  concentrated  market,  the  transactions  likely  would  lessen  competition.  See  Horizontal  Merger  Guidelines,  57  Fed. 


 Reg.  41552  (Sept.  10,  1992),  revised,  4  Trade  Reg.  Rep.  (CCH)    13104  (Apr.  8,  1997)  (  Horizontal  Merger  Guidelines  or  Guidelines).  Free  Press  claims  that  the  proposed  transactions  would  produce  enormous  regional 
 concentration,  creating  a  mean  HHI  increase  in  the  top  10  DMAs  of  10.  5%  in  the  MVPD  market  and  14.3%  in  the  cable  market,  and  in  the  top  25  DMAs  of  10.  38%  in  the  MVPD  market  and  13.  1%  in  the  cable  market.  Free  Press 
 Petition  at  4-  7,  Rose  Decl.  at  6,  Figs.  1,  2.  CWA/  IBEW  contend  that  in  the  cable  market  nationwide,  the  proposed  transactions  would  increase  the  HHI  by  212  points,  from  1,790  to  2,002,  amounting  to  a  highly  concentrated  market. 
 CWA/  IBEW  assert  that  the  HHI  for  the  MVPD  market  would  increase  by  134  points,  from  1,495  to  1,  629,  which  would  raise  significant  competitive  concerns  according  to  the  Horizontal  Merger  Guidelines.  CWA/  IBEW  Petition 
 at  8-  9,  App.  A.  DIRECTV  claims  that  16  RSN  markets  meet  the  Horizontal  Merger  Guidelines  criteria  for  a  presumption  that  a  transaction  is  likely  to  create  or  enhance  market  power  or  facilitate  its  exercise  in  highly 
 concentrated  markets,  with  a  post-  transaction  HHI  exceeding  1800  and  an  increase  in  HHI  of  more  than  100  points.  DIRECTV  avers  that  ten  of  these  RSN  markets  (C-  SET,  Comcast  SportsNet  Philly,  FSN  Florida,  Sun  Sports,  FSN 
 Ohio,  FSN  West/  West  2,  Mid-  Atlantic  Sports  Network,  Comcast/  Charter  Sports  Southeast,  Comcast  SportsNet  Mid-Atlantic,  and  FSN  Pittsburgh)  would  have  post-  transaction  HHIs  of  at  least  2000  and  a  change  of  at  least  325,  which 
 far  surpasses  the  thresholds  for  an  adverse  presumption.  DIRECTV  asserts  that  four  additional  RSN  markets  meet  the  Horizontal  Merger  Guidelines'  criteria  for  raising  significant  competitive  concerns.  DIRECTV  Comments  at  9-11, 
 Bamberger  &  Neuman  Decl.  at  Table  3.  See  also  CFA/  CU  Reply  Comments  at  13-  14,  Ex.  1.  269 
 Free  Press  Petition  at  8.  270 
 Id.  271 
 Id.  (citing  Applications  of  Ameritech  Corp.,  Transferor,  and  SBC  Communications  Inc.,  Transferee,  For  Consent  to  Transfer  Control  of  Corporations  Holding  Commission  Licenses  and  Lines  Pursuant  to  Sections  214  and  310(  d) 


 of  the  Communications  Act  and  Parts  5,  22,  24,  25,  63,  90,  95  and  101  of  the  Commission's  Rules,  14  FCC  Rcd  14712,  14741-  42  (1999)  (  SBC-  Ameritech  Order)). 
 272  Id.  at  6-  8,  Rose  Decl.  at  2-  6,  Fig.  1. 
 273  Free  Press  Petition  at  8-  9. 
 274  Applicants  Reply,  Ex.  G,  Ordover  and  Higgins  Decl.  at  11-  12. 
 275  Applicants  Reply  at  84. 
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 compete  for  the  same  subscribers.  276  They  contend  that  Comcast  and  Time  Warner  are  not  horizontal  competitors  between  which  consumers  have  a  choice.  277 
 80.  Discussion.  Given  the  conditions  we  impose  in  Section  VI.  D.  1.  below,  we  do  not  believe  that  approval  of  these  transactions  would  cause  a  measurable  negative  impact  on  MVPD  competition, 
 including  competition  from  overbuilders.  Since  there  are  almost  no  MVPD  markets  in  which  seller  concentration  will  increase  immediately  as  a  result  of  the  proposed  transactions,  traditional  antitrust 
 analysis  of  the  effects  of  an  immediate  increase  in  seller  market  power  does  not  apply.  278  In  particular,  the  commenters  use  of  HHI  calculations  is  not  appropriate  within  the  context  of  these  transactions.  An 
 important  prerequisite  for  HHI  analysis,  as  described  in  the  Horizontal  Merger  Guidelines,  is  that  the  sellers  compete  for  customers  business  in  the  same  product  and  geographic  markets.  279  A  merger  can 
 cause  prices  to  rise  if  it  reduces  the  number  of  firms  competing  to  supply  the  same  product  in  the  same  geographic  market.  The  proposed  transactions,  however,  generally  involve  the  acquisition  of  customers 
 in  geographic  markets  not  previously  served  by  the  acquiring  firm.  There  are  only  a  few  areas  where  the  proposed  transactions  would  eliminate  competition  between  the  Applicants    areas  where  one  Applicant 
 has  overbuilt  another  Applicants  service  area    and  in  those  areas  the  overbuilding  Applicant  has  relatively  few  subscribers.  280  Therefore,  with  a  few  exceptions,  individual  customers  would  see  no 
 reduction  in  the  number  of  firms  competing  to  provide  them  MVPD  service.  281 
 81.  Accordingly,  we  find  that  the  HHI  calculations  presented  by  commenters  do  not  provide  a  feasible  means  of  evaluating  the  competitive  effects  of  the  proposed  transactions  on  the  retail  distribution 


 market.  By  treating  cable  operators  that  serve  different,  geographically  distinct  sets  of  subscribers  as  direct  competitors,  commenters  have  calculated  HHIs  for  markets  in  which  firms  are  not  directly 
 competing  with  each  other  for  customers.  Consistent  with  our  precedent,  we  find  that  the  relevant  geographic  unit  for  the  analysis  of  competition  in  the  retail  distribution  market  is  the  household.  282  Since 
 the  Applicants  generally  operate  in  non-  overlapping  territories  and  do  not  compete  with  each  other  in  the  distribution  markets  they  serve,  the  proposed  transactions  would  not  reduce  the  number  of  competitive 
 alternatives  available  to  the  vast  majority  of  households.  283  The  transactions  therefore  would  not  increase 
 276  Id.  at  Ex.  G,  Ordover  and  Higgins  Decl.  at  11. 
 277  Id. 
 278  We  describe  elsewhere  the  potential  indirect  impact  that  the  transactions  and  the  Applicants  relationships  with 
 upstream  sellers  of  valuable  programming  could  have  on  their  incentive  to  withhold  that  programming  from  rival  MVPDs,  which  could  increase  the  Applicants  downstream  market  power.  See  infra  Section  VI.  D.  1. 


 279  Horizontal  Merger  Guidelines,  57  Fed.  Reg.  at  41554    1.0  (stating  that  [  i]  f  the  process  of  market  definition  and 
 market  measurement  identifies  one  or  more  relevant  markets  in  which  the  merging  firms  are  both  participants,  then  the  merger  is  considered  to  be  horizontal). 


 280  Time  Warner  Jan.  13,  2006  Response  to  Information  Request  II.  A.  10.;  Comcast  Jan.  13,  2006  Response  to 
 Information  Request  II.  A.  10.;  Adelphia  Jan.  13,  2006  Response  to  Information  Request  II.  A.  10.  Since  the  Applicants  cable  systems  generally  do  not  overlap,  there  are  very  few  markets  in  which  the  Applicants  are  directly 


 competing  with  each  other  to  sell  MVPD  service  to  a  particular  residence.  One  example  of  potential  direct  competition  is  in  Collier  and  Lee  Counties  in  Florida,  as  discussed  below.  See  infra  Section  VI.  C.  1.  c. 
 281  The  Applicants  increased  share  of  regional  and  national  markets  from  the  proposed  transactions  reported  by 
 commenters  reflects  only  the  number  of  customers  served  in  each  geographic  area.  The  addition  of  customers  in  adjacent  areas  may  appear  to  increase  the  firms  market  share  in  each  region,  but  it  actually  represents  the 


 replacement  of  one  supplier  by  another  for  those  customers  whose  cable  service  provider  changes.  282 
 Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23282    90;  DIRECTV  Surreply,  Ex.  A  at  2-  3.  As  explained  above,  because  it  would  be  administratively  impractical  and  inefficient  to  analyze  a  separate  relevant  geographic  market  for 


 each  individual  customer,  we  will  aggregate  relevant  geographic  markets  in  which  customers  face  similar  competitive  choices.  See  supra  Section  VI.  A.  1.  b.;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23282    90. 
 283  See  Applicants  Reply,  Ex.  G,  Ordover  and  Higgins  Decl.  at  11-  12;  DIRECTV  Surreply,  Ex.  A  at  2. 
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 market  concentration  in  the  relevant  geographic  market  for  the  retail  distribution  of  cable  services.  Economic  theory  indicates  that  an  acquiring  firm  will  not  be  better  able  to  raise  prices  if,  as  is  the  case 
 here,  consumers  did  not,  pre-  transaction,  have  a  greater  ability  to  choose  an  alternative  supplier  than  they  would  post-  transaction.  284  Thus,  the  mere  calculation  of  HHIs  for  a  perceived  market  is  insufficient  to 
 demonstrate  harm  resulting  from  a  horizontal  merger.  285 
 82.  Similarly,  we  conclude  that  Free  Press  examination  of  competition  at  the  DMA  level  is  misguided.  Free  Press  argues  that  the  transactions  would  result  in  an  absence  of  head-  to-  head 


 competition  between  Time  Warner  and  Comcast  in  22  of  the  top  40  DMAs,  and  in  119  of  the  210  Nielsen  DMAs.  286  In  DMAs  where  both  Time  Warner  and  Comcast  currently  operate,  however,  they  generally  do 
 not  compete  directly  for  subscribers.  287  Their  systems  usually  operate  in  adjacent  franchise  areas  within  a  DMA,  and  consumers  do  not  have  the  ability  to  choose  between  them.  Accordingly,  the  elimination  of 
 Time  Warners  or  Comcasts  presence  in  a  particular  DMA  does  not  likely  indicate  the  loss  of  head-  to-head  competition. 


 83.  We  do,  however,  agree  with  Free  Press  that  adjacent  service  areas  can  provide  a  useful  benchmark  for  consumers  to  compare  price  and  service.  As  CWA/  IBEW  point  out,  the  Los  Angeles  area 
 is  an  example  where  all  three  Applicants  currently  operate  in  adjacent  franchise  areas.  288  Following  the  transactions,  only  one  of  the  Applicants,  Time  Warner,  will  operate  in  that  metropolitan  area.  We 
 recognized  in  the  SBC-  Ameritech  Order  that  regulatory  efficacy  is  enhanced  when  there  are  a  sufficient  number  of  independent  sources  of  observation  available  for  comparison.  289  We  believe  that  not  only 
 regulators,  but  also  consumers,  can  benefit  from  the  ability  to  observe  how  different  cable  operators  are  serving  proximate  areas.  290  Although  benchmarking  opportunities  may  be  diminished  in  certain  areas  as  a 
 result  of  these  transactions,  we  are  unable,  based  on  the  record,  to  quantify  any  effects  on  competition  that  may  occur.  In  the  balancing  of  potential  public  interest  harms  against  potential  public  interest  benefits, 
 we  will  consider  the  potential  harms  that  may  arise  due  to  diminished  benchmarking  opportunities.  In  addition,  our  analysis  of  the  data  supplied  by  the  Applicants  and  other  parties  indicates  that  potential 
 harms  to  competition  among  MVPDs  are  likely  to  arise  in  some  markets.  As  explained  below,  we  are  adopting  remedial  conditions  to  mitigate  those  harms.  291  Because  the  conditions  will  mitigate  potential 
 harms  to  MVPD  competition,  we  expect  they  also  will  diminish  any  potential  loss  of  benchmarking  opportunities. 


 284  As  stated  above,  we  assume  that  customers  are  not  likely  to  move  to  another  neighborhood  of  a  city  just  to  obtain 
 cheaper  cable  television  service.  See  supra  Section  VI.  A.  1.b.;  see  also  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23282    90. 


 285  We  note  that  no  commenter  has  articulated  a  theory  purporting  to  explain  how  or  why  changes  in  HHI  indicate 
 that  Applicants  are  more  likely  as  a  result  of  the  transactions  to  engage  successfully  in  anticompetitive  strategies.  286 
 Free  Press  Petition  at  9,  Rose  Decl.  at  11-  13.  287 
 In  the  few  areas  where  Time  Warner  and  Comcast  have  overlapping  service  areas,  the  number  of  affected  subscribers  is  very  low.  See  Time  Warner  Jan.  13,  2006  Response  to  Information  Request  II.  A.  10.;  Comcast  Jan. 


 13,  2006  Response  to  Information  Request  II.  A.  10.  As  noted  above  and  discussed  below,  Time  Warner  and  Comcast  both  operate  in  Collier  and  Lee  Counties  in  Florida.  See  infra  Section  VI.  C.  1.  c. 
 288  CWA/  IBEW  Petition  at  10-  11. 
 289  SBC-  Ameritech  Order,  14  FCC  Rcd  at  14741-  42    57-  60. 
 290  See  Maine  Attorney  General  Ex  Parte  at  2  (stating  that  municipalities,  relying  on  the  benefits  of  competition, 
 compare  the  track  records  of  rival  prospective  franchisees  on  matters  such  as  price,  universal  service  and  contract  compliance);  Free  Press  Petition  at  8-  9  (noting  that  programmers  and  local  advertisers  may  also  benefit  from  the 


 presence  of  a  benchmark  competitor).  291 
 See  infra  Section  VI.  D. 
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 b.  Potential  Effects  on  Cable  Rates 
 84.  Positions  of  the  Parties.  Several  parties  assert  that  approval  of  the  transactions  would  lead  to  an  increase  in  cable  rates.  292  CFA/  CU  state  that  GAO  found  that  the  rates  charged  by  MSO  systems  are 


 5.4%  above  the  rates  of  cable  systems  that  are  not  owned  by  an  MSO.  293  CFA/  CU  and  DIRECTV  reference  Commission  reports  that  conclude  that,  not  only  do  MSO  systems  charge  more  than  systems 
 that  are  not  owned  by  an  MSO,  but  clustering  compounds  this  differential.  294  They  note  that  the  Commission  has  found  that  an  MSO  system  that  is  part  of  a  regional  cluster  is  likely  to  raise  its  already 
 higher  prices  an  additional  two  to  three  percent.  295  Similarly,  TAC  argues  that  regional  concentration  results  in  higher  prices  to  consumers,  given  an  MVPDs  enhanced  ability  to  obstruct  competition  from 
 overbuilders.  296  CFA/  CU  and  CWA/  IBEW  rely  on  HHI  analyses  to  contend  that  Comcasts  and  Time  Warners  increased  market  concentration  would  enable  them  to  raise  cable  prices  above  competitive 
 levels.  297 


 292  CWA  provides  a  report  finding  that  Time  Warner  likely  would  raise  its  cable  rates  in  order  to  pay  down  the  debt 
 incurred  by  the  transactions,  to  report  increased  annual  revenues  to  shareholders,  and  to  shorten  the  time  frame  needed  to  return  its  investment  in  the  newly-  acquired  systems.  Letter  from  Kim  Racine,  Racine  Financial 


 Consulting,  to  Robert  Sepe,  Action  Audits,  LLC  (Sept.  28,  2005),  Att.  at  1-  3,  transmitted  by  letter  from  Kenneth  R.  Peres,  PhD.,  Research  and  Development  Department,  CWA,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Dec.  16,  2005) 
 (  CWA  Dec.  16,  2005  Ex  Parte).  In  response,  Time  Warner  Inc.  provides  a  signed  declaration  by  the  companys  Senior  Vice  President  of  Investments  stating  that  (1)  Time  Warner  has  a  solid  investment  grade  rating  from  the 
 nations  three  leading  credit  rating  agencies  and  is  expected  to  maintain  an  investment  grade  rating  after  the  transactions;  (2)  the  report  mischaracterizes  the  companys  debt,  cash  flow,  and  liquidity;  (3)  the  report 
 misrepresents  the  cost  of  the  transactions;  and  (4)  the  report  fails  to  consider  that  Adelphia  is  more  highly  leveraged  than  Time  Warner.  Letter  from  Seth  A.  Davidson,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to 
 Marlene  H.  Dortch,  Secretary,  FCC  (Jan.  25,  2006)  (  Time  Warner  Jan.  25,  2006  Ex  Parte),  Adige  Decl.  at  1-  4.  See  also  Letter  from  Robert  F.  Sepe,  Action  Audits,  LLC,  to  Marlene  H.  Dortch,  Secretary,  FCC  (June  26,  2006) 
 (claiming  that  Time  Warner  failed  to  address  CWAs  allegation  that  the  transactions  will  lead  to  increased  cable  rates  and  asking  the  Commission  to  require  Time  Warner  to  upgrade  within  two  years  all  systems  acquired  from 
 Adelphia  that  serve  rural  communities).  In  addition,  some  commenters  expect  that  Comcasts  and  Time  Warners  quality  of  service  would  decline  or  would  not  improve.  See,  e.  g.,  NATOA  Reply  Comments  at  9-  10;  Maine 
 Attorney  General  Ex  Parte  at  5;  see  also  DIRECTV  Comments  at  27-  28.  293 
 CFA/  CU  Reply  Comments  at  19  (citing  GAO  Report:  Competition  and  Subscriber  Rates,  GAO-  04-  8,  App.  IV);  see  also  TAC  Petition  at  49. 


 294  CFA/  CU  Reply  Comments  at  19  (citing  Implementation  of  Section  3  of  the  Cable  Television  Consumer 
 Protection  and  Competition  Act  of  1992,  16  FCC  Rcd  4346,  4376  Att.  D-  1  (2001)  (  2000  Cable  Price  Survey)  and  citing  Implementation  of  Section  3  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992,  15 


 FCC  Rcd  10927,  10959  Att.  D-  1  (2000));  DIRECTV  Comments  at  26-  27  (also  citing  the  2000  Cable  Price  Survey);  see  also  TAC  Petition  at  49. 
 295  CFA/  CU  Reply  Comments  at  19;  DIRECTV  Comments  at  26-  27;  see  also  CFA/  CU  Reply  Comments  at  10 
 (stating  that  the  increases  in  firm  size  and  regional  clustering  will  lead  to  price  increases  of  five  to  ten  percent);  DIRECTV  Surreply  at  20-  22  (stating  that  clustering  does  not  lead  to  lower  cable  rates  or  improved  services). 


 CFA/  CU  contend  that  the  enormous  increases  in  cable  operators  cash  flows  demonstrate  that  higher  programming  and  operating  expenses  cannot  account  for  all  of  the  increases  in  consumer  prices.  CFA/  CU  Reply  Comments  at  20-21. 


 296  TAC  Petition  at  47-  50. 
 297  CFA/  CU  calculate  that  the  national  HHI  in  the  MVPD  market  would  increase  almost  200  points,  over  twice  the 
 threshold  for  concern  about  anticompetitive  impacts  in  moderately  concentrated  markets.  CFA/  CU  assert  that  the  average  increase  in  HHI  would  be  over  900  points  in  48  of  the  99  markets  currently  served  by  the  Applicants,  which 


 is  more  than  18  times  the  threshold  for  concern  in  highly  concentrated  markets.  CFA/  CU  Reply  Comments  at  13-14.  According  to  CWA/  IBEW,  the  HHI  in  the  cable  market  would  increase  by  212  points  to  2002,  and  the  HHI  in 
 the  MVPD  market  would  increase  by  134  points  to  1629.  CWA/  IBEW  Petition  at  8-  10. 
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 85.  The  Applicants  reject  claims  that  the  transactions  would  lead  to  unjustified  increases  in  cable  prices.  298  They  cite  competitive  pressures  from  other  MVPDs  and  emerging  competition  from  telephone 
 companies  as  a  restraint  on  cable  prices.  299 
 86.  Discussion.  We  find  the  evidence  regarding  potential  increases  in  cable  rates  to  be  insufficient  to  withhold  approval  of  these  particular  transactions.  Although  CFA/  CU  state  that  cable 


 systems  that  are  part  of  a  large  MSO  charge  prices  that  are  5.4%  higher  than  those  that  are  not,  300  the  GAO  study  that  CFA/  CU  cite  already  considered  Adelphia  to  be  a  large  MSO.  301  Therefore,  the  study 
 does  not  support  CFA/  CUs  contention.  Nor  are  we  persuaded  by  CFA/  CUs  or  CWA/  IBEWs  use  of  HHI  analyses  to  predict  that  cable  rates  will  increase  as  a  result  of  these  transactions.  302  As  explained 
 above,  these  HHI  calculations  are  not  appropriate  measures  of  concentration  because  they  include  firms  that  are  not  directly  competing  with  each  other  in  the  same  market.  303  Moreover,  the  conditions  we 
 impose  below  with  respect  to  access  to  RSNs  will  enhance  competition  among  MVPDs  in  the  affected  markets. 


 c.  Potential  for  Increased  Opportunity  to  Engage  in  Anticompetitive  Practices 
 87.  Positions  of  the  Parties.  MIC,  a  private  cable  operator  in  Florida,  contends  that  approval  of  the  transactions  would  reduce  competitive  alternatives  and  embolden  Comcast  to  engage  in 
 anticompetitive  practices.  304  MIC  alleges  that  expansion  of  its  service  in  Collier  County,  Florida  has  been  prevented  by  Comcasts  predatory  pricing  schemes  and  exclusive  long-  term  contracts  with  gated  and 
 condominium  communities,  which  contain  clauses  for  specific  easements  in  conduits  and  control  over  cable  inside  wiring.  305  MIC  believes  that  Comcasts  proposed  acquisition  of  Time  Warners  facilities  in 
 Collier  County  and  Lee  County  would  severely  harm  competition  for  bulk  and  condominium  contracts  in  those  counties  because  the  two  cable  operators  currently  compete  directly  against  each  other  for  those 
 contracts.  306  MIC  urges  the  Commission  to  deny  the  transfer  of  Time  Warners  systems  to  Comcast  in  Collier  and  Lee  Counties,  or  at  a  minimum,  to  order  Comcast  to  cease  its  anticompetitive  practices  against 
 MIC  and  to  waive  its  exclusive  agreements  with  gated  and  condominium  communities.  307  MIC  currently  has  a  complaint  pending  against  Comcast  in  federal  district  court.  308 


 298  Applicants  Reply  at  84. 
 299  Id.  Thierer  and  English  argue  that  competition  from  DBS  providers  and  telephone  companies  holds  down  cable 
 prices.  They  argue  that  given  the  decreasing  costs  of  switching  providers,  cable  operators  would  risk  losing  a  substantial  market  share  by  raising  prices.  Thierer  and  English  Comments  at  22-  24. 


 300  CFA/  CU  Reply  Comments  at  19-  20. 
 301  GAO  Report:  Competition  and  Subscriber  Rates,  GAO-  04-  8,  App.  IV  at  56,  59. 
 302  CFA/  CU  Reply  Comments  at  13-  14;  CWA/  IBEW  Petition  at  8-  10. 
 303  See  supra  paras.  80-  81. 
 304  MIC  Comments  at  1;  see  also  Letter  from  William  Gaston,  President,  Marco  Island  Cable,  to  Marlene  H.  Dortch, 
 Secretary,  FCC  (Feb.  13,  2006)  (  MIC  Feb.  13,  2006  Ex  Parte).  305 
 MIC  Comments  at  1.  MIC  claims  that  Comcast  charges  an  average  of  $30.00  per  month  for  cable  service  in  the  county  area  not  served  by  MIC  and  as  low  as  $11.50  per  month  in  the  county  area  where  it  faces  competition  from 


 MIC.  Id.  at  Att.  at  3.  According  to  MIC,  Comcasts  predatory  pricing  practices  are  aimed  only  at  MIC  and  not  at  Time  Warner.  Id.  at  1. 
 306  Id.  at  1-  2.  As  discussed  above,  Time  Warner  and  Comcast  generally  do  not  compete  directly  with  each  other  in 
 the  same  franchise  area.  See  supra  note  280.  307 
 MIC  Comments  at  2.  308 
 Id.  at  1;  see  Amended  Complaint  of  Marco  Island  Cable,  Inc.  v.  Comcast  Cablevision  of  the  South,  Inc.,  et  al.,  Case  No.  03-  5267-  CA  (Cir.  Ct.  of  20  th  Jud.  Cir.  of  Florida)  (filed  Jan.  12,  2004)  (later  removed  to  the  U.  S.  District 


 (continued.) 
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 Federal  Communications  Commission  FCC  06-  105 
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 88.  Similarly,  RCN  alleges  that  Comcast  employs  predatory  pricing  practices  by  offering  deep  discounts  either  to  inhibit  RCNs  planned  entry  into  a  market  or  to  lure  RCN  customers  to  Comcast.  309 
 RCN  claims  that  Comcast  specifically  targets  RCN  customers  and  does  not  offer  the  same  discounts  to  other  customers.  310  RCN  argues  that  Comcasts  offers  far  exceed  ordinary  promotional  discounts,  and 
 thus  they  constitute  unfair  anticompetitive  tactics.  311  RCN  asserts  that  consumers  are  harmed  to  the  extent  that  predatory  prices  drive  competitors  out  of  the  market  and  to  the  extent  that  full-  paying 
 customers  are  subsidizing  the  predatory  discounts.  312  RCN  asks  that  any  Commission  approval  of  the  transactions  be  conditioned  upon,  among  other  things,  uniform  subscriber  pricing  throughout  franchise 
 areas.  313 
 89.  The  Applicants  respond  that  this  proceeding  is  not  the  proper  forum  in  which  to  address  MICs  and  RCNs  claims.  The  Applicants  state  that  MICs  allegations  arise  under  provisions  of  Floridas 


 antitrust  laws  and  that  they  will  be  adjudicated  in  a  Florida  court  of  competent  jurisdiction.  314  The  Applicants  dispute  the  merits  of  MICs  pending  complaint  and  argue  that  even  if  the  claims  were  valid, 
 MIC  fails  to  show  how  its  allegations  relate  to  the  issues  in  this  proceeding.  315  The  Applicants  contend  that  the  Commission  has  declined  to  regulate  exclusive  MVPD  agreements  with  owners  of  multiple 
 dwelling  units  (  MDUs)  316  and  advise  that  the  correct  procedure  for  asserting  claims  of  predatory  pricing  is  to  file  a  complaint  with  the  Commission.  317  They  add  that,  in  any  event,  the  transactions  would  not 
 increase  the  likelihood  of  such  predatory  practices.  318  In  addition,  the  Applicants  claim  that  the  promotional  offers  RCN  cites  are  irrelevant  because  they  pertained  to  unregulated  services.  319  The 
 Applicants  state  that  promotional  discounts  are  appropriate  responses  to  the  competition  cable  companies  face  from  overbuilders  and  DBS  providers.  320  The  Applicants  deny  that  they  offer  promotional  discounts 
 only  to  those  areas  served  by  overbuilders.  321  They  argue  that  RCNs  assertions  do  not  meet  the  stringent 
 (Continued  from  previous  page)  Court  for  the  Middle  Dist.  of  Florida,  where  it  remains  pending  as  Case  No.  2:  04-  CV-  26-  Ft.  M-  29-  DNF).  In  its 


 complaint,  MIC  avers  that  Comcast  (1)  engages  in  predatory  pricing  practices;  (2)  enters  into  long-  term,  exclusive  contracts  with  homeowners  associations  and  condominium  owners  that  prevent  the  individual  residents  from 
 choosing  an  alternative  cable  provider;  (3)  intimidates  customers  wishing  to  switch  to  MIC  by  threatening  removal  of  their  cable  wiring  and/  or  threatening  litigation;  and  (4)  offers  developers  cash  payments  to  induce  them  to  do 
 business  with  Comcast.  MIC  Comments,  Att.  at  1-  6.  The  court,  however,  recently  granted  Comcasts  motions  for  summary  judgment  with  respect  to  MICs  claims  of  predatory  pricing  and  with  respect  to  two  of  MICs  complaints 
 regarding  exclusivity.  Marco  Island  Cable,  Inc.  v.  Comcast  Cablevision  of  the  South,  Inc.,  No.  2:  04-  CV-  26-  FTM-29DNF,  2006  WL  1814333,  at  *3-  8,  *9  (M.  D.  Fla.  July  3,  2006). 
 309  RCN  Comments  at  16-  17. 
 310  Id. 
 311  Id. 
 312  Id.  at  17-  18. 
 313  Id.  at  19. 
 314  Applicants  Reply  at  98-  99. 
 315  Id. 
 316  Id.  at  98-  99  n.  333  (citing  Implementation  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of 
 1992;  Cable  Home  Wiring,  18  FCC  Rcd  1342,  1364-  65    60  (2003)  (  Cable  Home  Wiring  Second  Report  and  Order)). 


 317  Id.  at  86. 
 318  Id. 
 319  Id.  at  86-  87. 
 320  Id.  at  84-  85. 
 321  Id.  at  85-  86. 
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 requirements  for  establishing  a  legitimate  predatory  pricing  claim,  which  the  Supreme  Court  has  noted  are  a  rarity.  322 
 90.  Discussion.  We  decline  to  deny  the  transfers  as  proposed  or  to  impose  the  requested  conditions  related  to  these  alleged  anticompetitive  practices.  First,  the  Applicants  correctly  note  that  the 
 Commission  previously  decided  not  to  prohibit  long-  term,  exclusive  agreements  with  MDU  owners.  323  Second,  although  predatory  pricing  schemes  are  matters  of  serious  concern,  the  allegations  are  not 
 properly  addressed  in  the  context  of  these  transactions.  The  Commissions  uniform  rate  provisions  do  not  prevent  cable  operators  from  making  distinctions  among  reasonable  categories  of  service  and  customers 
 when  providing  discounts  within  a  franchise  area.  324  Targeted  pricing,  however,  can  signal  the  anticompetitive  use  of  market  power  by  a  dominant  firm.  As  the  Commission  stated  in  the  Comcast-AT& 
 T  Order,  although  targeted  pricing  between  and  among  established  competitors  of  relatively  equal  market  power  may  be  procompetitive,  targeted  pricing  discounts  by  an  established  incumbent  with 
 dominant  market  power  may  be  used  to  eliminate  nascent  competitors  and  stifle  competitive  entry.  325  We  do  not  believe,  however,  that  there  is  sufficient  evidence  for  us  to  conclude  that  approval  of  these 
 transactions  would  increase  the  Applicants  incentive  or  ability  to  resort  to  such  tactics,  because  these  transactions  generally  would  not  increase  the  market  power  of  an  incumbent  (or  the  incumbents 
 successor  in  the  case  of  a  swap)  within  a  franchise  area.  In  any  event,  parties  alleging  specific  claims  of  anticompetitive  pricing  schemes  may  follow  the  Commissions  procedures  for  filing  a  complaint  or  seek 
 redress  in  court.  326 
 91.  Although  MIC  alleges  that  head-  to-  head  competition  would  be  diminished  because  Comcast  and  Time  Warner  compete  directly  against  each  other  in  Collier  and  Lee  Counties  for  contracts  to  serve 


 MDUs,  327  Comcast  avers  that  other  entities  can  serve  MDUs  in  those  markets.  328  MICs  complaint  seems  to  be  that  long-  term  exclusive  contracts  between  Comcast  and  MDU  owners  in  these  counties  are  a  barrier 
 to  entry  by  other  providers,  such  as  MIC.  This  complaint  does  not  constitute  a  transaction  specific  concern.  Whether  or  not  Comcast  and  Time  Warner  both  continue  to  serve  these  counties,  MIC  would 
 face  the  prospect  of  having  to  compete  for  bulk  accounts  that  may  be  subject  to  long-  term  exclusive  agreements.  Moreover,  to  the  extent  MICs  complaint  relates  to  the  elimination  of  a  potential  provider  of 
 service  to  MDUs,  it  is  not  clear  from  the  record  that  Comcast  and  Time  Warner  compete  with  each  other  to  a  meaningful  extent  today  for  these  accounts.  Comcast  avers  that  it  and  Time  Warner  serve  separate 
 geographic  areas  within  the  counties,  and  the  two  cable  providers  have  not  overbuilt  cable  systems  reaching  the  same  homes  in  either  county.  329  MIC  disputes  that  view  and  states  that  Time  Warner  is 
 currently  serving  two  large  housing  developments  within  Comcasts  territory  in  Collier  County.  MIC  notes  that  because  the  developments  are  near  a  major  route  of  current  and  potential  development,  Time 
 Warner  could  become  a  significant  competitor  to  Comcast  in  Collier  County  as  development  continues  along  that  route  in  the  years  ahead.  330  We  conclude  that  the  potential  harm  to  competition  in  this  one 


 322  Id.  at  85  n.  290  (citing  Brooke  Group  Ltd.  v.  Brown  &  Williamson  Tobacco  Corp.,  509  U.  S.  209,  226-  27  (1993)) 
 and  at  86  n.  292.  323 
 Cable  Home  Wiring  Second  Report  and  Order,  18  FCC  Rcd  at  1364-  72    59-  77.  324 
 See  47  C.  F.  R.    76.  984.  325 
 Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23293    120.  326 
 Complaints  regarding  any  removal  of  inside  wiring  in  violation  of  our  cable  inside  wiring  rules  also  may  be  filed  with  the  Commission  or  in  court. 


 327  MIC  Comments  at  2. 
 328  Letter  from  Martha  E.  Heller,  Wiley  Rein  &  Fielding,  LLP,  Counsel  for  Comcast  Corp.,  to  Marlene  H.  Dortch, 
 Secretary,  FCC  (Jan.  13,  2006)  (  Comcast  Jan.  13,  2006  Ex  Parte)  at  1-  2.  329 
 Id.  at  1.  330 
 MIC  Feb.  13,  2006  Ex  Parte  at  1-  2. 
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 county  based  on  two  instances  of  overbuilding  to  MDUs  is  not  sufficient  to  create  a  material  risk  of  public  interest  harm. 
 d.  Potential  Harms  to  Franchising  Process 
 92.  Positions  of  the  Parties.  NATOA  contends  that  approval  of  the  transactions  would  undermine  the  ability  of  local  franchising  authorities  (  LFAs)  to  serve  the  interests  of  their  residents, 


 frustrating  congressional  intent.  331  NATOA  argues  that  increased  national  and  regional  concentration  would  make  it  difficult  for  LFAs  to  enforce  reasonable  rates  and  quality  customer  service.  332  Both 
 NATOA  and  the  Florida  Communities  aver  that  increased  consolidation  over  the  past  several  years  has  put  LFAs  in  an  unequal  bargaining  position  with  respect  to  cable  operators,  which  increasingly  ignore 
 local  community  interests  and  needs.  333  They  warn  that  the  transactions  would  shift  the  balance  of  power  in  franchising  negotiations  even  further  in  favor  of  Comcast  and  Time  Warner.  334  More  specifically, 
 NATOA  argues  that  the  expanding  regional  dominance  of  Comcast  and  Time  Warner  would  diminish  the  effectiveness  of  LFAs  primary  tool  of  enforcement  --  denial  of  a  franchise  renewal.  335 


 93.  NATOA  contends  that  even  if  Comcast  and  Time  Warner  agree  to  honor  Adelphias  commitments  to  LFAs,  they  may  not  fulfill  them.  336  NATOA  provides  several  examples  of  Comcasts 
 alleged  failures  to  comply  with  the  terms  of  various  franchise  agreements,  including  franchise  agreements  it  assumed  as  a  result  of  its  merger  with  AT&  T.  337  In  addition,  NATOA  claims  that  the  Applicants, 
 particularly  Comcast,  have  a  history  of  resisting  LFAs  demands  for  public,  educational  and  governmental  (  PEG)  channels.  338 


 94.  NATOA  argues  that  if  the  Commission  approves  the  transactions,  it  must  impose  conditions  that  preserve  the  ability  of  LFAs  to  enforce  franchise  agreements  and  protect  community  interests.  .339 
 NATOA  requests  that  the  Commission  require  that  Time  Warner  and  Comcast  comply  with  any  franchise  terms  previously  agreed  to  by  Adelphia.  340  NATOA  also  urges  the  Commission  to  require  that  Time 
 Warner  and  Comcast  complete  any  build-  out  schedules  that  may  be  agreed  to  as  part  of  the  transfer 
 331  NATOA  Reply  Comments  at  2,  4-  5  (stating  that  Congress  recognized  that  LFAs  are  in  the  best  position  to  protect 
 local  consumers  from  the  market  power  of  cable  operators).  332 
 Id.  at  5.  333 
 Id.  at  5-  8;  Florida  Communities  Comments  at  4-  6;  see  also  Maine  Attorney  General  Ex  Parte  at  5  (claiming  that  the  loss  of  competition  that  would  result  from  the  transactions  would  diminish  the  LFAs  bargaining  power,  and 


 LFAs  increasingly  would  be  dealing  with  a  cable  operators  distant  headquarters  where  local  conditions  and  geography  are  not  well  known). 
 334  NATOA  Reply  Comments  at  5-  8;  Florida  Communities  Comments  at  4-  6. 
 335  NATOA  Reply  Comments  at  8  (contending  that  increased  regional  concentration  hinders  LFAs  ability  to  attract 
 overbuilders  or  other  competitors  because  alternative  providers  are  not  likely  to  seek  a  franchise  in  an  area  that  is  isolated  in  the  middle  of  a  cable  cluster  where  there  is  no  opportunity  to  expand  their  coverage  area). 


 336  Id.  at  9. 
 337  Id.  at  6-  8. 
 338  Id.  at  14-  16;  see  also  Letter  from  Parul  Desai,  Assistant  Director,  Media  Access  Project,  to  Marlene  H.  Dortch, 
 Secretary,  FCC  (Jan.  12,  2006)  at  1-  2  (proposing  that  an  expedited  complaint  process  be  put  in  place  through  which  local  governments  or  those  using  public  access  channels  can  submit  complaints  to  the  Commission  regarding  the 


 cable  operators  refusal  to  carry  out  its  obligations  under  agreements  already  in  place);  see  Communications  Act    611,  47  U.  S.  C.    531. 
 339  NATOA  Reply  Comments  at  16.  The  City  of  San  Buenaventura  requests  that  the  Commission  condition 
 approval  of  the  license  transfers  at  issue  here  upon  grant  of  all  required  LFA  approvals  for  the  transfer  of  franchise  rights.  We  address  these  concerns  below.  See  infra  Section  X.  A. 


 340  NATOA  Reply  Comments  at  16-  17. 
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 negotiations  with  an  LFA.  341  NATOA  believes  that  failure  to  adhere  to  any  conditions  required  under  the  terms  of  an  existing  franchise  agreement,  an  LFAs  transfer  approval,  or  the  Commissions  approval 
 should  be  actionable  immediately  in  federal  court,  and  evidence  of  failure  to  comply  with  the  Commissions  conditions  should  be  deemed  an  admission.  342  NATOA  also  asks  the  Commission  to 
 condition  approval  on  full  and  complete  compliance  with  the  obligations  contained  in  the  Communications  Act  and  the  Commissions  rules  regarding  LFAs  rights  to  review  transfer 
 applications.  343 
 95.  Discussion.  It  would  be  inefficient  and  impractical  for  the  Commission  to  referee  all  the  disputes  that  may  arise  from  the  numerous  LFA  reviews  required  by  these  transactions,  including  disputes 


 relating  to  pre-  existing  franchise  conditions  arising  from  previous  transfers.  Our  approval  of  the  transactions  does  not  affect  the  rights  of  LFAs  to  negotiate  desired  terms  and  conditions  in  their  transfer 
 approvals.  344  Accordingly,  we  will  not  impose  the  conditions  NATOA  seeks. 
 96.  We  acknowledge  that  it  may  be  more  difficult  for  an  LFA  that  denies  a  franchise  renewal  to  find  a  replacement  provider  if  the  LFAs  franchise  area  is  in  the  midst  of  a  regional  cluster.  Nevertheless, 


 we  cannot  conclude  that  preserving  or  enhancing  the  attractiveness  of  individual  franchise  areas  to  other  providers  that  one  day  may  seek  to  replace  the  incumbent  is  a  valid  basis  for  the  Commission  to  withhold 
 or  condition  approval  of  the  Applications.  The  conditions  we  impose  regarding  access  to  RSNs,  however,  should  ameliorate  any  difficulties  LFAs  may  encounter  in  attracting  providers  that  are  willing  and  able  to 
 replace  the  incumbent  should  the  LFA  deny  a  franchise  renewal. 
 2.  Video  Programming  Market 
 97.  The  proposed  transactions  also  involve  competing  purchasers  in  the  upstream  market  for  programming  supply.  Even  though  the  firms  are  selling  the  programming  to  different  retail  customers, 


 they  are  attempting  to  purchase  it  from  the  same  suppliers.  Thus,  the  proposed  transactions  would  reduce  the  number  of  purchasers  of  programming  and  would  increase  Comcasts  and  Time  Warners  market 
 shares  in  certain  programming  markets,  which  could  increase  Applicants  market  power  in  those  markets.  345  Economic  theory  generally  suggests  that  the  exercise  of  market  power  causes  harm  through 
 the  reduction  of  output  purchased  by  the  firm  with  market  power.  346 


 341  Id.  at  12. 
 342  Id.  at  17. 
 343  Id.  at  10-  11;  see  47  U.  S.  C.    537;  47  C.  F.  R.    76.  502  et  seq.  NATOA  asks  that  the  Commission  not  take  any 
 action  within  this  proceeding  that  in  any  way  jeopardizes,  or  infringes  upon  the  right  of  an  LFA  to  require  the  filing  of  the  FCC  Form  394,  the  right  to  require  submission  of  additional  information,  or  the  tolling  of  the  120  day  period 


 until  such  time  as  the  company  has  provided  the  appropriate  response,  or  in  any  way  impedes  the  statutory  rights  of  local  government.  NATOA  Reply  Comments  at  11.  NATOA  also  encourages  the  Commission  to  make  leased 
 access  a  more  viable  option  for  independent  programmers  and  to  ensure  a  meaningful  mechanism  for  addressing  individual  complaints  of  market  power  abuse.  Id.  at  17-  18. 
 344  See  Letter  to  Jill  Abeshouse  Stern,  4  FCC  Rcd  5061,  5062  (1989)  (  Stern). 
 345  The  merger  of  two  or  more  competing  buyers  increases  buyer  concentration  and  reduces  the  number  of  firms 
 competing  to  buy  inputs  from  suppliers.  This  reduction  in  competition  can  increase  buyers  market  power,  giving  them  the  ability  to  force  down  prices  paid  to  suppliers.  Economic  theory  finds  this  harmful  when  the  lower  prices 


 are  the  result  of  buyers  purchasing  lower  quantities  of  a  good.  Carlton  and  Perloff  at  105-  07.  346 
 A  large  buyer  can  force  down  the  price  of  an  input  by  purchasing  less  of  it.  That  is,  if  a  buyer  offers  a  lower  price,  suppliers  will  find  it  profitable  to  sell  it  fewer  units  of  the  input.  Carlton  and  Perloff  at  105-  07.  According  to 


 standard  economic  theory,  a  firms  actions  cause  harm  if  they  lead  to  the  inefficient  production  and/  or  distribution  of  goods.  If  a  firms  exercise  of  market  power  does  not  change  the  quantity  of  output  purchased,  then  the  production 
 and  distribution  of  goods  has  not  changed,  and  the  firms  action  has  caused  no  decrease  in  efficiency. 
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 98.  Several  parties  are  concerned  that  the  transactions  would  enable  Comcast  and  Time  Warner  to  exercise  undue  buying  power  in  the  video  programming  market.  According  to  these  commenters,  the 
 horizontal  reach  of  these  entities  nationally  and  in  certain  regions  would  establish  them  as  gatekeepers  that  could  make  or  break  a  national  or  regional  programming  network.  Commenters  urge  the 
 Commission  to  adopt  conditions  to  ensure  that  the  transactions  do  not  impede  the  flow  of  video  programming  to  consumers. 


 99.  Below,  we  discuss  the  parties  positions  and  analyze  whether  the  proposed  transactions  would  confer  on  Comcast  or  Time  Warner  a  degree  of  market  power  that  could  result  in  public  interest  harms 
 with  respect  to  video  programming  in  national  and  regional  markets.  More  specifically,  and  consistent  with  the  objectives  of  section  613(  f)  of  the  Communications  Act,  we  consider  whether  the  transactions  are 
 likely  to  unfairly  impede  the  flow  of  programming  to  consumers  by  reducing  the  supply  of  video  programming  available  for  distribution.  347  We  conclude  that  adoption  of  a  condition  permitting  the 
 arbitration  of  disputes  relating  to  commercial  leased  access  will  mitigate  any  potential  public  interest  harms  deriving  from  increased  horizontal  concentration  resulting  from  the  transactions.  Moreover,  as 
 detailed  in  Sections  VIII  and  IX  below,  we  find  that  the  transactions  are  likely  to  speed  the  deployment  of  local  telephone  service  and  advanced  video  programming  offerings,  including  local  VOD,  to  Adelphias 
 subscribers  and  expedite  the  resolution  of  Adelphias  pending  bankruptcy  proceeding  and  thereby  minimize  the  costs  borne  by  Adelphia  and  its  stakeholders  as  a  result  of  that  process.  Accordingly, 
 approval  of  the  transactions,  as  conditioned,  is  consistent  with  the  congressional  objective  set  forth  in  section  613(  f)  that  the  Commission  should  account  for  any  efficiencies  and  other  benefits  that  might  be 
 gained  through  increased  ownership  or  control  when  setting  limits  on  cable  system  ownership.  348 
 a.  Nationally  Distributed  Programming 
 100.  Positions  of  the  Parties.  Several  commenters  argue  that  the  proposed  transactions  would  result  in  public  interest  harms  to  the  market  for  nationally  distributed  programming.  349  They  assert  that 


 Comcasts  and  Time  Warners  increased  subscriber  reach  would  allow  them,  either  unilaterally  or  in  concert  with  each  other,  to  determine  which  programmers  survive  in  the  video  programming 
 marketplace.  350  They  argue  that  the  proposed  transactions  would  limit  programming  diversity  and  would  result  in  higher  prices  charged  to  consumers.  351  They  further  argue  that  Comcasts  and  Time  Warners 
 increased  regional  concentration,  particularly  in  the  top  television  markets,  would  magnify  the  alleged  anticompetitive  impact  of  their  national  reach.  352 


 347  In  this  Section,  consistent  with  section  613(  f)(  2)(  A)  of  the  Act,  we  address  whether  decisions  by  Comcast  or 
 Time  Warner  would  impede  the  flow  of  programming  by  preventing  programming  networks  from  launching  or  surviving  without  carriage  by  either  firm.  In  Section  VI.  D.  3,  we  examine  whether  the  transactions  would  increase 


 the  likelihood  that  unaffiliated  networks  would  be  foreclosed  from  the  market  on  the  basis  of  discrimination  in  favor  of  networks  owned  by  Comcast  or  Time  Warner.  See  47  U.  S.  C.    613(  f)(  2)(  B). 
 348  47  U.  S.  C.    613(  f)(  2)(  D).  We  note  that  the  policy  goals  set  forth  in  section  613(  f)  specifically  pertain  to  limits 
 imposed  in  the  rulemaking  context.  349 
 See  TAC  Petition  at  7;  CWA/  IBEW  Petition  at  5,  18;  Free  Press  Petition  at  10;  CFA/  CU  Reply  Comments  at  7.  Examples  of  nationally  distributed  programming  include  ESPN,  CNN,  C-  SPAN  and  The  Weather  Channel. 


 350  TAC  Petition  at  7;  CWA/  IBEW  Petition  at  5,  18;  Free  Press  Petition  at  10;  CFA/  CU  Reply  Comments  at  7. 
 351  TAC  Petition  at  7;  CWA/  IBEW  Petition  at  5,  18;  CFA/  CU  Reply  Comments  at  10;  BTNC  Sept.  7,  2005  Ex  Parte 
 at  4-  6.  352 
 Free  Press  Petition  at  7;  TAC  Petition  at  28. 
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 101.  Commenters  note  that  the  transactions  would  result  in  Comcast  and  Time  Warner  controlling  programmers  access  to  a  combined  total  of  almost  half  of  all  MVPD  subscribers.  353  They 
 assert  that  in  order  to  generate  the  advertising  revenue  necessary  for  success,  a  national  network  must  reach  between  40  and  60  million  subscribers.  354  TAC  355  asserts  that  20  million  subscribers  represent  a 
 minimum  distribution  threshold  below  which  Nielsen  Media  Research  cannot  provide  reliable  ratings.  356  TAC  claims  that  only  92  national,  non-  premium  networks  have  reached  20  million  subscribers,  that  80  of 
 them  are  affiliated  with  an  MVPD  or  broadcast  network,  and  that  70  are  owned  by  one  of  the  big  six  media  companies  (i.  e.,  Disney,  Viacom,  NBC  Universal,  News  Corp.,  Time  Warner  and  Comcast).  TAC 
 also  states  that  of  the  92  cable  networks  that  have  achieved  20  million  subscribers,  90  are  carried  by  both  Comcast  and  Time  Warner.  357  TAC  also  asserts  that  new  advertiser-  supported  networks  must  present  to 
 investors  a  credible  path  to  50  million  subscribers  within  five  to  seven  years  in  order  to  raise  enough  capital  to  enter  the  market.  TAC  contends  that,  because  only  49.2  million  MVPD  subscribers  would  be 
 available  to  new  networks  that  are  denied  carriage  by  Comcast  and  Time  Warner  post-  transaction,  it  would  be  impossible  for  new  networks  to  enter  the  market  without  carriage  by  at  least  one  of  these 
 firms.  358 
 102.  TAC  and  Free  Press  assert  that  regional  concentration  resulting  from  the  transactions,  particularly  in  the  top  25  DMAs,  which  include  the  financial,  359  entertainment,  360  and  political  361  capitals 


 353  CWA/  IBEW  Petition  at  1;  TAC  Petition  at  27;  EchoStar  Comments  at  11.  EchoStar  asserts  that  this  would  give 
 Comcast  unfettered  power  to  decide  whether  a  programmer  would  gain  access  to  Comcasts  platform.  EchoStar  Comments  at  12. 


 354  CWA/  IBEW  Petition  at  18-  19  (citing  comments  filed  by  various  programmers  in  the  Commissions  a  la  carte 
 proceeding  in  MB  Docket  No.  04-  207  and;  Keith  S.  Brown,  A  Survival  Analysis  of  Cable  Networks,  Media  Bureau  Staff  Research  Paper  No.  2004-  1  (rel.  Dec.  7,  2004)  (  Cable  Network  Survival  Study)).  CFA  states  that  a  national 


 programmer  must  gain  carriage  on  systems  that  pass  at  least  50  million,  and  perhaps  as  many  as  75  million,  households  to  achieve  long  term  viability.  CFA/  CU  Reply  Comments  at  30. 
 355  TAC  describes  itself  as  an  independent  programming  network  offering  family-  friendly  cable  programming  that 
 celebrates  America,  its  communities,  unsung  heroes  and  ordinary  people  who  accomplish  the  extraordinary.  TAC  Petition  at  4.  In  seeking  nationwide  distribution,  TAC  states  that  it  has  sought  carriage  from  Comcast  and  Time 


 Warner  for  years  but  has  been  rebuffed.  Id.  at  9.  356 
 Id.  at  20.  357 
 Id.  at  45,  Ex.  1.  358 
 Id.  at  26,  28.  TAC  asserts  that  only  five  independent  networks  (in  addition  to  the  two  C-  SPAN  networks)  have  reached  the  50  million  subscriber  threshold    The  Weather  Channel,  Home  Shopping  Network,  Hallmark  Channel, 


 Oxygen,  and  EWTN.  Id.  at  14.  We  note  that  both  Time  Warner  Inc.  and  Charter  Communications  have  equity  interests  in  Oxygen  Media,  and  the  Home  Shopping  Network  and  the  Hallmark  Channel  (formerly  the  Odyssey 
 Network)  were  affiliated  with  cable  operators  from  at  least  1994  until  2003  and  from  1997  until  2003,  respectively.  See  Twelfth  Annual  Video  Competition  Report,  21  FCC  Rcd  at  2633,  2639;  First  Annual  Video  Competition  Report, 
 9  FCC  Rcd  at  7589,  Table  3;  Annual  Assessment  of  The  Status  of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  Fourth  Annual  Report,  13  FCC  Rcd  1034,  1215,  Table  F-  1  (1998)  (  Fourth  Annual  Video 
 Competition  Report);  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  Tenth  Annual  Report,  19  FCC  Rcd  1606,  App.  C,  Table  C-  5  (2004). 
 359  New  York  City  is  the  number  one  ranked  Nielsen  television  market.  Nielsen  Media  Research  provides  television 
 audience  estimates  for  broadcast  and  cable  networks,  television  stations,  national  syndicators,  regional  cable  television  systems,  satellite  providers,  advertisers,  and  advertising  agencies.  Television  audience  research 


 information  is  used  to  buy  and  sell  television  time  and  to  make  programming  decisions.  360 
 Los  Angeles,  California  is  the  number  two  ranked  Nielsen  television  market.  361 
 Washington,  D.  C.  is  the  number  eight  ranked  Nielsen  television  market. 
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 of  the  country,  would  magnify  the  harmful  impact  of  national  concentration.  362  According  to  TAC,  potential  harms  arising  from  control  over  these  markets  cannot  be  mitigated  by  competition  from  DBS, 
 because  with  its  subscriber  base  spread  over  the  country,  DBS  cannot  discipline  such  pocket  monopolies.  363  TAC  argues  that  viewers  in  the  top  geographic  markets  are  the  most  attractive  to 
 advertisers  because  they  contain  the  most  viewers,  the  most  affluent  viewers,  the  trend-  setting  viewers,  and  a  major  press  presence.  364  Free  Press  also  argues  that  carriage  of  a  network  by  one  MSO  within  a 
 region  creates  pressure  on  other  MSOs  within  that  region  to  provide  carriage,  but  networks  could  lose  the  ability  to  gain  exposure  as  a  result  of  the  transactions  because  the  number  of  DMAs  with  multiple  MSOs 
 would  be  reduced.  365 
 103.  TAC  also  claims  that  Comcast  and  Time  Warner  generally  make  the  same  carriage  decisions  regarding  particular  networks  and  that  because  carriage  by  both  is  required  for  a  nationwide 


 networks  long-  term  viability,  other  MVPDs  are  reluctant  to  carry  a  network  that  is  not  already  carried  by  Comcast  and  Time  Warner.  366  BTNCs  arguments  are  similar  to  TACs.  BTNC  asserts  that  Comcast  and 
 Time  Warner  are  not  likely  to  provide  widespread  distribution  of  unaffiliated  networks,  and  absent  distribution  agreements  with  Comcast  or  Time  Warner,  investors  are  not  likely  to  provide  financing,  and 
 smaller  MVPDs  are  not  likely  to  provide  carriage,  to  minority  owned,  independent  networks.  367  In  support  of  its  allegations,  TAC  submits  data  showing  that  no  network  that  failed  to  gain  carriage  with  at 
 least  Comcast  or  Time  Warner  has  succeeded  in  achieving  the  subscriber  thresholds  required  for  survival.  368  TAC  claims  that  of  the  networks  it  examined,  only  two  networks    the  NFL  Network  and 
 Inspiration  Network    have  surpassed  the  20  million  subscriber  threshold  without  carriage  by  Comcast  and  Time  Warner;  that  no  network  appears  to  have  reached  20  million  homes,  with  one  of  Time  Warner 
 or  Comcast,  but  without  Adelphia;  and  that  all  of  the  networks  it  examined  that  are  distributed  to  25  million  or  more  households  are  carried  by  both  Comcast  and  Time  Warner.  369 


 104.  IBC  raises  concerns  regarding  nationally  distributed  ethnic  programming.  370  IBC  estimates  that  Comcast  has  approximately  two  million  cable  subscribers  who  are  Hispanic  and  argues  that 
 Comcast  has  become  a  critical  gatekeeper  for  any  new  Hispanic  programming  content.  371  According  to  IBC,  Comcast  provides  programming  content  to  its  U.  S.  Hispanic  subscribers  by  backhauling  existing 
 networks  from  Latin  America.  As  a  result,  IBC  argues,  U.  S.  producers  of  Hispanic  programming  content  have  minimal  access  to  Comcasts  Hispanic  audiences.  372 


 105.  TAC  and  other  commenters  urge  the  Commission  to  impose  conditions  on  the  approval  of  the  transactions  in  order  to  remedy  or  reduce  the  alleged  potential  harms.  They  request  mandatory 


 362  TAC  Petition  at  28-  29;  Free  Press  Petition  at  7.  TAC  posits  that  even  if  an  independent  network  is  able  to  reach 
 the  minimum  number  of  MVPD  subscribers  needed  for  survival,  it  would  be  unable  to  compete  effectively  if  Comcast  and  Time  Warner  choose  not  to  carry  it,  because  carriage  in  top  television  markets  is  critical  to  securing 


 advertising  dollars.  TAC  Petition  at  19.  363 
 Id.  at  29-  33.  364 
 Id.  at  28-  29.  365 
 Free  Press  Petition  at  8.  366 
 TAC  Petition  at  45.  367 
 BTNC  Sept.  7,  2005  Ex  Parte  at  5-  6.  368 
 TAC  Petition  at  8,  21,  Ex.  1.  369 
 Id.  at  22.  370 
 IBC  Reply  Comments  at  2.  371 
 Id.  372 
 Id. 
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 arbitration  between  Comcast/  Time  Warner  and  independent  programmers  to  ensure  that  carriage  decisions  are  reasonable  and  ask  the  Commission  to  establish  leased  access  rates  that  allow  independent 
 programmers  to  gain  distribution.  373  TAC  further  proposes  that  50%  of  any  new  networks  added  by  either  Comcast  or  Time  Warner  post-  transaction  be  independent  of  affiliation  with  either  the  Applicants  or 
 broadcasters;  that  a  two-  stage  arbitration  process  be  instituted  for  carriage  refusals  involving  allegations  of  discrimination;  and  that,  alternatively,  the  Commission  institute  a  fast-  track  90-  day  complaint 
 resolution  process.  374  BTNC  requests  that  the  Commission  require  Comcast  and  Time  Warner  to  provide  analog  distribution  to  BTNC  in  markets  where  African  Americans  represent  20%  or  more  of  the 
 population  and  digital  carriage  in  markets  where  African  Americans  represent  between  5%  and  20%  of  the  population.  375 


 106.  CWA/  IBEW  contend  that  the  Commission  should  complete  its  cable  horizontal  ownership  review  before  acting  on  the  transfer  applications.  376  They  assert  that  without  determining  the 
 ownership  limits  necessary  to  protect  consumers  from  anticompetitive  behavior  and  to  promote  media  diversity,  the  Commission  cannot  determine  whether  the  instant  transactions  would  result  in 
 anticompetitive  harm.  377 
 107.  Applicants  reject  that  contention,  asserting  that  the  30%  cable  horizontal  ownership  limit  has  been  invalidated  and  that,  in  any  case,  neither  Time  Warner  nor  Comcast  would  exceed  the  limit 


 following  consummation  of  the  transactions.  378  Applicants  maintain  that  because  the  proposed  transactions  would  not  result  in  either  Comcast  or  Time  Warner  serving  more  than  30%  of  U.  S.  MVPD 
 subscribers,  the  transactions  would  have  only  pro-  competitive  effects.  379  Additionally,  Applicants  highlight  the  growth  of  competition  in  the  downstream  MVPD  market  and  the  courts  remand  of  the 
 Commissions  horizontal  and  vertical  ownership  rules,  suggesting  that  even  levels  of  horizontal  concentration  well  above  30%  would  not  pose  a  threat  to  unaffiliated  programmers.  380  Applicants  assert 
 that  there  is  no  uniform  number  of  households  to  which  cable  networks  must  secure  carriage  in  order  to  be  viable,  because  networks  have  different  cost  structures,  different  ways  of  distributing  their  content,  and 
 different  ways  of  recovering  their  costs.  381  Applicants  dispute  TACs  assertion  that  Time  Warner  and 


 373  TAC  Petition  at  5-  6;  Free  Press  Petition  at  41-  42;  CFA/  CU  Reply  Comments  at  43.  In  its  Reply  Comments, 
 CWA/  IBEW  urges  the  Commission  to  [  p]  romote  the  ability  of  independent  programmers  to  gain  access  to  Comcast  and  Time  Warners  cable  systems.  CWA/  IBEW  Reply  Comments  at  3. 


 374  Letter  from  Kathleen  Wallman,  Counsel  for  TAC,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Nov.  8,  2005)  (  TAC 
 Nov.  8,  2005  Ex  Parte)  at  11-  12.  Regarding  its  second  proposed  condition,  TAC  requests  a  procedure  for  consulting  a  neutral  arbitrator  to  perform  an  initial  review  at  the  expense  of  the  programmer  alleging 


 discrimination.  Id.  at  12.  If  the  arbitrator  determines  that  the  matter  should  go  forward,  TAC  proposes  that  the  programmer  post  a  bond,  and  that  the  arbitration  process  be  similar  to  the  one  instituted  in  the  News  Corp.-  Hughes 
 Order.  Id.  Regarding  its  third  (alternative)  proposed  condition,  TAC  requests  that  a  fast-  track  complaint  resolution  process  be  instituted  under  the  FCCs  existing  program  access  rules.  Id.  It  appears,  however,  that  TAC  is 
 referring  to  the  Commissions  program  carriage  rules,  47  C.  F.  R.    76.  1300-  02.  375 
 BTNC  Sept.  7,  2005  Ex  Parte  at  9.  376 
 CWA/  IBEW  Petition  at  2.  377 
 Id.  378 
 Applicants  Reply  at  27.  379 
 Public  Interest  Statement  at  79-  80  (stating  that  the  Commission  previously  indicated  that  cable  operators  serving  fewer  than  30%  of  MVPDs  are  not  able  to  restrict  unreasonably  the  flow  of  programming  to  consumers  or  hinder  the 


 development  of  new  and  diverse  programming).  380 
 Id.  at  80-  82.  381 
 Applicants  Reply  at  37. 
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 Comcast  can  act  individually  to  prevent  an  independent  network  from  reaching  viability.  382  They  state  that  post-  transaction,  there  would  be  almost  66  million  MVPD  households  that  Comcast  does  not  serve 
 and  more  than  75  million  that  Time  Warner  does  not  serve,  and  thus  neither  could  properly  be  blamed  for  TACs  inability  to  obtain  carriage  commitments.  383  Applicants  further  dispute  TACs  assertions  that  the 
 Applicants  post-  transaction  subscribership  in  the  top  DMAs  will  result  in  harms.  384  Regarding  TACs  suggestion  that  there  is  a  high  correlation  between  the  carriage  decisions  of  Comcast  and  Time  Warner, 
 the  Applicants  assert  that  there  can  be  no  anticompetitive  behavior  inferred  from  two  experienced  cable  operators  declining  carriage  of  an  unproven  network.  385 


 108.  Discussion.  As  Applicants  have  correctly  noted,  both  firms  will  remain  below  the  Commissions  30%  horizontal  ownership  limit.  386  Moreover,  Comcast  will  not  control  a  larger  share  of 
 the  market  than  it  did  at  the  time  we  approved  the  Comcast-  AT&  T  transaction.  387  Indeed,  its  national  subscriber  reach  will  increase  by  less  than  1%  as  a  result  of  the  transactions.  388 


 109.  To  address  the  allegations  of  potential  public  interest  harm,  we  adopt  a  condition  that  will  permit  the  use  of  commercial  arbitration  to  resolve  disputes  about  commercial  leased  access.  389  Pursuant 
 to  this  condition,  programmers  seeking  to  use  commercial  leased  access  may  submit  disputes  about  the  terms  of  access  to  an  arbitrator  for  resolution.  The  arbitrator  will  be  directed  to  settle  disputes  about 
 pricing  in  accordance  with  the  formula  set  forth  in  the  Commissions  commercial  leased  access  rules.  390  The  arbitration  condition  shall  remain  in  effect  for  six  years  from  adoption  date  of  this  Order.  Moreover, 
 we  find  that  the  remedial  conditions  we  impose  regarding  program  access,  discussed  below,  will  further  mitigate  any  potential  harms  affecting  programming  supply. 


 110.  We  do  not  agree  with  CWAs  assertion  that  the  Commission  must  complete  the  cable  ownership  rulemaking  before  addressing  the  issues  in  this  adjudicatory  proceeding.  The  proposed 
 transactions  will  result  in  a  de  minimis  increase  in  Comcasts  national  subscriber  reach,  which  will  remain  below  30%,  and  Time  Warner  will  serve  fewer  than  18%  of  MVPD  subscribers  post-  transaction,  well 


 382  Id.  at  35-  37;  Letter  from  Michael  H.  Hammer,  Willkie  Farr  &  Gallagher,  LLP,  Counsel  for  Adelphia 
 Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Dec.  9,  2005)  (  Adelphia  Dec.  9,  2005  Ex  Parte)  at  8  (citing  examples  of  networks  that  have  launched  successfully  without  carriage  by  both  Comcast  and  Time  Warner 


 or  with  carriage  by  only  one  firm).  383 
 Applicants  Reply  at  35,  37.  384 
 Time  Warner  Mar.  23,  2006  Ex  Parte  at  5-  6  (stating  that  the  data  cited  by  TAC  indicates  that  the  transactions  will  result  in  only  a  minor  change  in  top  50  DMA  subscribership  distribution). 


 385  Applicants  Reply  at  38. 
 386  Public  Interest  Statement  at  73-  74. 
 387  As  a  result  of  the  Comcast-  AT&  T  merger,  Comcast  served  28.9%  of  the  total  U.  S.  MVPD  subscribers,  the  same 
 percentage  it  would  serve  as  a  result  of  the  transactions  now  before  us.  See  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23248    3;  Applicants  Reply  at  30.  Although  Comcast  will  acquire  approximately  680,000  subscribers  as  a  result 


 of  the  transactions,  total  MVPD  subscriber  reach  has  increased  steadily  over  time.  Moreover,  although  TAC  asserts  that  carriage  in  the  top  DMAs  is  critical  for  a  national  programmers  success,  there  is  no  evidence  in  the  record 
 regarding  the  level  of  distribution  within  any  market  that  is  necessary  for  TAC  or  any  other  network  to  become  viable. 


 388  TAC  has  submitted  in  the  cable  ownership  rulemaking  proceeding  the  same  evidence  that  it  submitted  here,  and 
 we  will  evaluate  in  that  proceeding  the  full  range  of  empirical  and  theoretical  evidence  available  to  determine  an  appropriate  limit. 


 389  47  C.  F.  R.    76.  970-  71,  76.  975. 
 390  47  C.  F.  R.    76.970. 
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 below  the  Commissions  30%  limit.  391  In  addition,  Comcast  and  Time  Warner  will  be  required  to  abide  by  any  ownership  limits  the  Commission  may  adopt  in  its  pending  rulemaking  proceeding  and  have 
 pledged  to  do  so.  392  Finally,  we  find  in  Sections  VIII  and  IX  below  that  the  transactions  would  result  in  significant  public  interest  benefits,  in  particular  the  accelerated  deployment  of  competitive,  facilities-based 
 local  telephone  service  to  Adelphias  subscribers  and  the  timely  resolution  of  Adelphias  bankruptcy  proceeding.  The  realization  of  these  benefits  would  be  delayed  substantially  were  we  to  defer 
 consideration  of  the  Applications  until  the  Commission  concludes  its  pending  rulemaking  proceeding. 
 b.  Regional  Programming 
 111.  Positions  of  the  Parties.  CWA/  IBEW  contend  that  clustering  gives  cable  operators  control  of  entire  metropolitan  media  markets,  making  the  clustered  MSOs  virtually  indispensable  to  local 


 and  regional  programmers  seeking  distribution.  393  They  claim  that  this  increases  the  regional  market  power  of  cable  operators,  allowing  them  to  obtain  steep  discounts  from  programmers  for  their  content. 
 CWA/  IBEW  note  that  one  regional  sports  network  (RSN)  that  was  not  vertically  integrated  with  cable  operators  ceased  operation  because  it  was  unable  to  obtain  distribution  over  the  larger  MVPDs  in  its 
 region.  394  Victory  Sports  One  (VSO),  a  network  launched  by  owners  of  the  Minnesota  Twins  Major  League  Baseball  team  in  October  2003,  ceased  operation  in  May  2004.  Similarly,  BTNC  relates  that 
 Floridas  News  Channel  (FNC)  was  put  out  of  business  by  Comcast  when  FNC  refused  to  renegotiate  its  multi-  year  affiliation  agreement  with  Comcast.  BTNC  also  claims  that  Time  Warner  refused  to  carry 
 FNC  on  its  Florida  cable  systems  after  FNC  declined  to  grant  Time  Warner  a  50%  ownership  interest  in  FNC.  395 


 112.  TCR  Sports  Broadcasting  Holding,  LLP  (  TCR)  d/  b/  a  Mid-  Atlantic  Sports  Network,  Inc.  (  MASN)  asserts  that  the  transactions  would  dramatically  increase  Comcasts  share  of  MVPD 
 households  in  the  Washington  and  Baltimore  DMAs,  giving  Comcast  a  stranglehold  on  the  provision  of  MVPD  services  in  the  key  areas  that  TCR  has  been  assigned  for  the  telecasting  of  Washington  Nationals 
 and  Baltimore  Orioles  baseball  games.  TCR  is  an  RSN  that  holds  the  underlying  rights  to  produce  and  exhibit  Washington  Nationals  and  Baltimore  Orioles  baseball  games.  TCR  claims  that  post-  transaction, 
 Comcast  would  pass  54%  of  all  homes  in  the  Washington  DMA  and  76%  of  all  homes  in  the  Baltimore  DMA.  TCR  alleges  that  Comcasts  share  of  MVPD  subscribers  in  the  Washington  DMA  would  increase 
 from  42%  to  53%  and  its  share  of  MVPD  subscribers  in  the  Baltimore  DMA  would  increase  from  76%  to  80%.  396  After  the  transactions,  TCR  asserts,  Comcast  would  be  able  to  exercise  enormous  market  power 
 as  a  monopoly  buyer  of  video  programming  content  in  the  region.  397  To  remedy  potential  harms,  TCR  proposes  that  the  Commission  condition  approval  of  the  transactions,  requiring  Comcast  to  divest  its 
 interest  in  its  RSN,  CSN,  and  to  carry  TCR  on  just  and  reasonable  terms.  398  In  the  alternative,  TCR  urges  the  Commission  to  prohibit  Comcast  from  requiring  a  financial  interest  in  any  video  programming 


 391  As  stated  in  Section  V  supra,  there  are  approximately  94  million  total  U.  S.  MVPD  subscribers.  See  supra  note 
 199.  392 


 See  Public  Interest  Statement  at  73  n.  184.  393 
 CWA/  IBEW  Petition  at  14,  16.  394 
 Id.  at  15-  16.  395 
 BTNC  Sept.  7,  2005  Ex  Parte  at  7-  8.  396 
 Letter  from  David  C.  Frederick,  Kellogg,  Huber,  Hansen,  Todd,  Evans  &  Figel,  Counsel  for  TCR,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Feb.  21,  2006)  (  TCR  Feb.  21,  2006  Ex  Parte)  Att.  at  8. 


 397  TCR  Petition  at  15. 
 398  TCR  Reply  Comments  at  6. 
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 service  as  a  condition  of  carriage  and  from  engaging  in  any  other  discrimination  against  unaffiliated  programmers.  399 
 113.  In  their  reply,  Applicants  assert  that  Comcasts  transaction-  related  increase  in  concentration  would  be  quite  modest  in  the  footprints  of  RSNs  it  controls.  400  Moreover,  Applicants 
 assert  that  the  pending  cable  ownership  proceeding  is  the  appropriate  place  to  consider  any  concerns  about  regional  concentration.  401  Applicants  dismiss  TCRs  proposed  conditions,  concluding  that  they 
 merely  restate  existing  program  carriage  rules,  are  not  within  the  Commissions  power,  or  should  be  considered,  if  at  all,  in  connection  with  the  program  carriage  complaint  filed  by  TCR  for  that  purpose.  402 


 114.  Discussion.  We  find  that  there  is  a  potential  that  Comcasts  or  Time  Warners  market  power  could  increase  the  price  consumers  will  have  to  pay  for  programming,  as  TCR  suggests,  if  an 
 unaffiliated  network  is  denied  carriage  and  exits  the  market  as  a  result,  and  if  Comcast  or  Time  Warner  then  buys  the  distribution  rights,  creates  its  own  network,  and  withholds  the  programming  from 
 competitors,  reducing  retail  competition.  403  We  address  this  concern  below  in  Section  VI.  D.  3.  b.  In  the  rulemaking  context,  the  Commission  has  balanced  the  benefits  of  clustering    such  as  the  development  of 
 regional  programming,  upgraded  cable  infrastructure,  and  improved  customer  service    with  the  likelihood  of  anticompetitive  harm.  404  A  further  notice  of  proposed  rulemaking  on  the  cable  ownership 
 rules  is  pending.  405  That  proceeding  may  provide  an  appropriate  vehicle  to  address  any  general  concerns  about  the  effect  of  any  industry  trend  toward  increased  clustering  and  assess  the  potential  benefits  and 
 harms  of  such  regional  concentration.  406  In  particular,  the  Commission  can  re-  examine  in  that  proceeding  the  extent  to  which  clustering  may  facilitate  the  creation  of  regional  programming,  increase  the  potential 
 for  foreclosure  of  unaffiliated  regional  programmers,  or  produce  any  other  public  interest  benefits  or  harms.  As  noted  above,  Comcast  and  Time  Warner  will  be  subject  to  any  revised  limits  the  Commission 
 may  adopt  in  that  proceeding  and  have  pledged  to  do  so.  407  In  addition,  we  note  that  the  commercial 


 399  Id.  at  6-  7.  CWA/  IBEW  state  that  they  support  conditions  proposed  by  other  commenters  that  would  promote  the 
 ability  of  independent  programmers  to  secure  distribution  over  the  Comcast  and  Time  Warner  systems.  CWA/  IBEW  Reply  Comments  at  3. 


 400  Specifically,  Comcast  asserts  that  there  would  be  no  significant  change  in  concentration  within  the  footprints  of 
 CSN  West  and  CSN  Chicago  (remaining  at  23%  and  20%  of  TV  households,  respectively),  a  three  percentage  point  increase  in  Philadelphia  (53%  to  56%  of  TV  households),  a  four  percentage  point  increase  in  the  Southeast  (16%  to 


 20%  of  TV  households),  and  an  eight  percentage  point  increase  in  the  Mid-  Atlantic  (30%  to  38%  of  TV  households).  Applicants  Reply  at  58,  Table  1,  Ex.  F,  Ordover  and  Higgins  Decl.  at    27. 
 401  Applicants  Reply  at  39. 
 402  Id.  at  77-  78  (citing  TCR  Sports  Broadcast  Holding,  L.  L.  P.  v.  Comcast  Corp.,  CSR-  6911-  N  (filed  June  14,  2005)). 
 Applicants  did  not  reply  to  TCRs  proposed  condition  that  the  Commission  require  divestiture  of  CSN  Mid-  Atlantic.  403 


 The  condition  we  impose  below  in  Section  VI.  D.  1.  a.  regarding  access  to  regional  sports  programming  is  designed  to  address  the  Applicants  incentive  to  pursue,  and  ability  to  accomplish,  such  a  strategy. 


 404  1993  Cable  Ownership  Second  Report  and  Order,  8  FCC  Rcd  at  8572-  73    16-  17  (confirming  the 
 Commissions  authority  to  adopt  regional  subscriber  limits  and  concluding  that  there  was  no  basis  in  the  record  for  imposing  regional  limits  that  could  reduce  investment  in  the  development  of  regional  programming,  upgraded  cable 


 infrastructure,  and  improved  customer  service).  405 
 See  Cable  Ownership  Second  Further  Notice,  20  FCC  Rcd  at  9374.  406 
 Cable  Ownership  Further  Notice,  16  FCC  Rcd  at  17322    10-  11.  In  that  regard,  we  note  that  section  613(  f)(  2)(  B)  requires  the  Commission  to  ensure,  among  other  public  interest  objectives,  that  cable  operators 


 affiliated  with  video  programmers  do  not  favor  such  programming  in  determining  carriage  on  their  cable  systems.  See  47  U.  S.  C.    613(  f)(  2)(  B). 
 407  See  supra  para.  110. 
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 leased  access  condition  we  adopt  herein  will  address  concerns  regarding  the  transactions  effect  on  the  carriage  of  unaffiliated  programming,  including  regional  programming. 
 D.  Potential  Vertical  Harms 
 115.  In  this  Section,  we  consider  whether  the  Applicants  would  be  more  likely  to  engage  in  anticompetitive  strategies  with  respect  to  the  distribution  of  video  programming  as  a  result  of  the 


 transactions.  Both  Comcast  and  Time  Warner  own  cable  systems,  as  well  as  popular  national  and  regional  programming  networks.  Adelphia,  by  contrast,  owns  only  cable  systems  and  does  not  own  any 
 programming  networks.  The  transactions  therefore  would  vertically  integrate  Comcasts  and  Time  Warners  upstream  programming  assets  with  Adelphias  downstream  cable  systems.  The  acquisitions 
 would  expand  the  acquiring  firms  subscriber  reach  in  particular  downstream  markets  by  combining  Adelphias  cable  systems  with  their  own.  Time  Warners  and  Comcasts  exchange  of  cable  systems  will 
 further  concentrate  each  firms  market  share  in  particular  regions.  The  question  before  us  is  whether  the  increased  subscriber  reach  and  new  vertical  integration  established  as  a  result  of  the  transactions  would 
 increase  the  likelihood  of  various  forms  of  vertical  foreclosure  and  anticompetitive  pricing,  harming  competition  in  the  MVPD  and  programming  supply  markets  and,  ultimately,  the  public  interest.  408 


 116.  With  respect  to  concerns  about  MVPDs  access  to  programming,  we  find  that  the  transactions  may  increase  the  likelihood  of  harm  in  markets  in  which  Comcast  or  Time  Warner  now  hold, 
 or  may  in  the  future  hold,  an  ownership  interest  in  RSNs,  which  ultimately  could  increase  retail  prices  for  consumers  and  limit  consumer  MVPD  choice.  We  impose  remedial  conditions  to  mitigate  these  potential 
 harms.  We  find  such  harms  are  not  likely  to  arise  with  respect  to  affiliated  national  or  non-  sports  regional  programming,  or  unaffiliated  programming.  With  respect  to  concerns  relating  to  program  carriage,  we 
 find  that  the  transactions  are  likely  to  increase  the  incentive  and  ability  of  Comcast  and  Time  Warner  to  deny  carriage  to  RSNs  that  are  not  affiliated  with  them.  We  therefore  adopt  a  further  condition  to 
 mitigate  these  potential  harms. 
 1.  Access  to  Affiliated  Programming 
 117.  Economic  Background.  The  potential  for  a  vertically  integrated  firm,  as  the  result  of  a  transaction,  to  foreclose  downstream  competitors  from  important  inputs  (e.  g.,  programming)  is  the  subject 


 of  substantial  economic  literature.  Theoretically,  where  a  firm  that  has  market  power  in  an  input  market  acquires  a  firm  in  the  downstream  output  market,  the  acquisition  may  increase  the  incentive  and  ability  of 
 the  integrated  firm  to  raise  rivals  costs  either  by  raising  the  price  at  which  it  sells  the  input  to  downstream  competitors  or  by  withholding  supply  of  the  input  from  competitors.  409  By  doing  so,  the 
 integrated  firm  may  be  able  to  harm  its  rivals  competitive  positions,  enabling  it  to  raise  prices  and  increase  its  market  share  in  the  downstream  market,  thereby  increasing  its  profits  while  retaining  lower 
 prices  for  itself  or  for  firms  with  which  it  does  not  compete. 
 118.  One  way  by  which  vertically  integrated  firms  can  raise  their  rivals  costs  is  to  charge  higher  programming  prices  to  competing  MVPDs  than  to  their  affiliated  MVPDs.  However,  the 


 Commissions  program  access  rules  prohibit  price  discrimination  by  programming  networks  that  are  vertically  integrated  with  a  cable  operator  unless  the  price  discrimination  is  based  on  market  conditions.  410 


 408  The  term  foreclosure,  when  used  with  respect  to  program  access,  refers  to  a  vertically  integrated  MVPDs 
 withholding  of  its  affiliated  programming,  to  the  detriment  of  competing  MVPDs.  When  used  with  respect  to  program  carriage,  the  term  refers  to  a  vertically  integrated  MVPDs  refusal  to  carry  the  programming  of  an 


 unaffiliated  network  such  that  the  programmer  would  exit  the  market  or  would  be  deterred  from  entering  the  market.  409 
 See,  e.  g.,  Riordan  &  Salop  at  527-  38;  see  also  Thomas  G.  Krattenmaker  &  Steven  C.  Salop,  Anticompetitive  Exclusion:  Raising  Rivals  Costs  to  Achieve  Power  over  Price,  96  YALE  L.  J.  209,  234-  38  (1986). 


 410  For  example,  satellite  cable  programming  vendors  may  establish  different  prices,  terms,  and  conditions  to  take 
 into  account  actual  and  reasonable  differences  in  the  cost  of  creation,  sale,  delivery,  or  transmission  of  satellite  cable  programming  .  .  .  .  47  C.  F.  R.    76.  1002(  b)(  2). 
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 119.  Alternatively,  a  vertically  integrated  firm  could  disadvantage  its  downstream  competitors  by  raising  the  price  of  an  input  to  all  downstream  firms  (including  itself)  to  a  level  greater  than  that  which 
 would  be  charged  by  a  non-  vertically  integrated  supplier  of  the  input.  Such  nondiscriminatory  pricing  is  not  prohibited  by  the  Commissions  program  access  rules.  411  A  vertically  integrated  cable  operator  might 
 employ  such  a  strategy  to  raise  its  rivals  costs.  Because  they  would  have  to  pay  more  for  the  programming,  MVPD  competitors  would  likely  respond  either  by  raising  their  prices  to  subscribers,  not 
 purchasing  the  programming,  or  reducing  marketing  activities.  The  vertically  integrated  MVPD  could  then  enjoy  a  competitive  advantage,  because  the  higher  price  for  the  programming  that  it  would  pay 
 would  be  an  internal  transfer  that  it  could  disregard  when  it  sets  its  own  prices.  By  forcing  its  competitors  either  to  pay  more  for  the  programming  and  increase  their  retail  rates,  or  forgo  purchasing  the 
 programming,  the  vertically  integrated  MVPD  could  raise  its  prices  to  some  extent  without  losing  subscribers.  The  profitability  of  a  uniform  price  increase  would  depend  on  the  market  share  of  the  MVPD 
 within  the  distribution  footprint  of  the  affiliated  programming  network. 
 120.  A  vertically  integrated  firm  could  also  attempt  to  disadvantage  its  rivals  by  engaging  in  a  foreclosure  strategy,  i.  e.,  by  withholding  a  critical  input  from  them.  The  economic  literature  suggests  that 


 an  integrated  firm  will  engage  in  permanent  foreclosure  only  if  the  increased  profits  it  earns  in  the  downstream  market  (e.  g.,  the  MVPD  market)  as  the  result  of  foreclosure  exceed  the  losses  it  incurs  from 
 reduced  sales  of  the  input  in  the  upstream  market  (e.  g.,  the  programming  market).  412  The  Commissions  program  access  rules  generally  prohibit  exclusive  dealing  by  vertically  integrated  programming  networks, 
 but  terrestrially  delivered  programming  is  not  covered  by  the  rules.  413  Theoretically,  cable  operators  could  move  an  affiliated  network  onto  terrestrial  delivery  platforms  and  then  withhold  it  from  rival 
 MVPDs.  Because  cable  operators  serve  discrete  franchise  areas  and  generally  do  not  compete  against  each  other  within  franchise  areas,  a  cable  operator  could  narrowly  target  a  foreclosure  strategy  to  harm 
 only  its  rivals  by  crafting  exclusive  distribution  agreements  that  permit  adjacent,  non-  rival  cable  operators  to  carry  the  affiliated  programming  and  that  exclude  the  programming  only  from  rival  firms  competing  in 
 the  cable  operators  service  areas. 
 121.  If  an  integrated  firm  calculates  that  permanent  foreclosure  would  be  unprofitable,  or  if  such  foreclosure  is  prohibited  by  our  rules,  it  nevertheless  might  find  it  profitable  to  engage  in  temporary 


 foreclosure  in  certain  markets.  For  temporary  foreclosure  to  be  profitable  in  the  context  of  MVPDs  access  to  programming,  there  must  be  a  significant  number  of  subscribers  who  switch  MVPDs  to  obtain 
 the  integrated  firms  programming  and  do  not  immediately  switch  back  to  the  competitors  product  once  the  foreclosure  has  ended.  In  markets  exhibiting  consumer  inertia,  414  temporary  foreclosure  may  be 
 profitable  even  where  permanent  foreclosure  is  not.  The  profitability  of  this  strategy  in  the  MVPD  context  derives  not  only  from  subscriber  gains,  but  also  from  the  potential  to  extract  higher  prices  in  the 
 long  term  from  MVPD  competitors.  Specifically,  by  temporarily  foreclosing  supply  of  the  programming  to  an  MVPD  competitor  or  by  threatening  to  engage  in  temporary  foreclosure,  the  integrated  firm  may 
 improve  its  bargaining  position  so  as  to  be  able  to  extract  a  higher  price  from  the  MVPD  competitor  than 
 411  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  513,  523    84,  107. 
 412  See,  e.  g.,  Riordan  &  Salop  at  528-  31.  For  foreclosure  (either  permanent  or  temporary)  to  be  profitable,  the 
 withdrawal  of  the  input  subject  to  foreclosure  must  cause  a  change  in  the  characteristics  of  the  downstream  product,  causing  some  customers  to  shift  to  competing  downstream  products. 


 413  47  C.  F.  R.    76.1001-  76.1002.  The  program  access  rules  prohibit  satellite  cable  programming  vendors  in  which 
 a  cable  operator  has  an  attributable  interest  from  entering  into  exclusive  contracts  with  cable  operators  unless  the  Commission  finds  the  exclusivity  to  be  in  the  public  interest.  47  C.  F.  R.    76.  1002(  c)(  2),  (4).  A  terrestrial  network 


 delivers  programming  to  cable  headends  by  fiber  or  microwave  links  rather  than  by  satellite.  A  programming  network  that  is  delivered  terrestrially  is  not  satellite  cable  programming.  47  C.  F.  R.    76.  1000(  h). 


 414  Consumer  inertia  can  cause  demand  to  adjust  slowly  to  changes  in  the  price  or  quality  of  a  product.  For  example, 
 consumers  may  be  slow  to  adjust  their  purchasing  behavior  when  significant  cost  or  effort  is  required  to  find  and  purchase  alternative  sources  of  supply. 
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 it  could  have  negotiated  if  it  were  a  non-  integrated  programming  supplier.  In  order  for  a  vertically  integrated  firm  successfully  to  employ  temporary  foreclosure  or  the  threat  of  temporary  foreclosure  as  a 
 strategy  to  increase  its  bargaining  position,  there  must  be  a  credible  risk  that  subscribers  would  switch  MVPDs  to  obtain  the  programming  for  a  long  enough  period  to  make  the  strategy  profitable. 


 a.  Regional  Sports  Programming 
 (i)  Introduction  and  Analytical  Approach 
 122.  Introduction.  As  discussed  in  greater  detail  below,  a  number  of  commenters  contend  that  the  transactions  would  increase  the  likelihood  that  Comcast  and/  or  Time  Warner  would  seek  to 


 disadvantage  their  MVPD  rivals  by  increasing  the  costs  of  affiliated  regional  sports  programming,  either  in  a  discriminatory  fashion  or  uniformly  with  respect  to  all  buyers,  or  by  permanently  or  temporarily 
 withholding  desirable  programming  from  them.  415  They  urge  the  Commission  to  deny  or  condition  its  approval  of  the  Applications.  416 


 123.  We  find  that  the  transactions  would  enable  Comcast  and  Time  Warner  to  raise  the  price  of  access  to  RSNs  by  imposing  uniform  price  increases  applicable  to  all  MVPDs,  including  their  own 
 systems,  by  engaging  in  so-  called  stealth  discrimination,  or  by  permanently  or  temporarily  withholding  programming.  As  commenters  contend,  such  strategies  are  likely  to  result  in  increased  retail  rates  and 
 fewer  choices  for  consumers  seeking  competitive  alternatives  to  Comcast  and  Time  Warner.  417  Accordingly,  to  mitigate  the  potential  public  interest  harms,  we  adopt  remedial  conditions.  Below  we 
 discuss  our  analytical  approach  and  our  findings  regarding  each  theory  of  harm. 
 124.  Analytical  Approach.  At  the  outset,  we  note  that  RSNs  are  often  considered  must-have  programming.  418  As  the  Commission  observed  in  the  News  Corp.-  Hughes  Order,  the  basis  for  the 


 lack  of  adequate  substitutes  for  regional  sports  programming  lies  in  the  unique  nature  of  its  core  component:  RSNs  typically  purchase  exclusive  rights  to  show  sporting  events,  and  sports  fans  believe  that 
 there  is  no  good  substitute  for  watching  their  local  and/  or  favorite  team  play  an  important  game.  419  Hence,  an  MVPDs  ability  to  gain  access  to  RSNs  and  the  price  and  other  terms  of  conditions  of  access 
 can  be  important  factors  in  its  ability  to  compete  with  rivals.  Applicants  acknowledge  that  an  MVPD  that 


 415  EchoStar  Comments  at  4-  7;  CFA/  CU  Reply  Comments  at  39;  DIRECTV  Comments  at  8-  25.  According  to 
 DIRECTV,  its  HHI  calculations  indicate  that  Comcast  and  Time  Warner  would  be  able  to  exercise  market  power  in  20  of  the  29  RSN  markets  by  denying  rivals  access  to  RSN  programming.  DIRECTV  Comments  at  10-  11.  We  note 


 that  HHIs  calculated  for  markets  in  which  the  merging  parties  are  not  direct  competitors  for  retail  customers,  i.  e.,  HHI  calculations  based  on  a  DMA  unit  of  analysis,  do  not  represent  accurate  measures  of  market  concentration  and 
 market  power.  See  supra  Section  VI.  C.  1.  a.  Commenters  who  present  HHI  data  have  not  explained  how  their  calculations  relate  to  a  vertical  acquisition  or  a  particular  theory  of  harm.  See  CWA/  IBEW  Petition  at  8-  10,  App.  A; 
 DIRECTV  Comments  at  9-  11,  Bamberger  Decl.  at  4-  5,  Tables  3-  4;  CFA/  CU  Reply  Comments  at  13-  14,  Ex.  1;  Free  Press  Petition  at  4-  8,  Rose  Decl.  at  2-  10,  Figs  1,  2. 


 416  Letter  from  Richard  Ramlall,  Senior  Vice  President,  RCN,  to  Kevin  J.  Martin,  Chairman,  FCC,  at  3,  transmitted 
 by  letter  from  Jean  L.  Kiddoo,  Bingham  McCutchen,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Apr.  14,  2006)  (  RCN  Apr.  14,  2006  Ex  Parte);  Letter  from  Richard  Ramlall,  Senior  Vice  President,  RCN,  to  Chairman  Martin  and 


 Commissioners  Adelstein,  Copps,  and  Tate,  FCC,  at  6,  transmitted  by  letter  from  Jean  L.  Kiddoo,  to  Marlene  H.  Dortch,  FCC  (Mar.  3,  2006)  (  RCN  Mar.  3,  2006  Ex  Parte). 


 417  See,  e.  g.,  DIRECTV  Comments  at  30. 
 418  Id.  at  iii;  see  also  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  496-  97    44;  supra  Section  IV.  B.  (discussing 
 must-  have  programming).  419 
 News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  535    133. 
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 drops  local  sports  programming  risks  subscriber  defections  and  that  MVPDs  will  drive  hard  bargains  to  buy,  acquire,  defend  or  exploit  regional  sports  programming  rights.  420 
 125.  Further,  we  conclude,  as  we  did  in  the  Comcast-  AT&  T  and  News  Corp.-  Hughes  transactions,  that  for  the  analysis  of  potential  harms  deriving  from  access  to  regional  programming,  the 
 relevant  geographic  market  is  regional.  421  For  RSNs,  the  relevant  unit  of  analysis  encompasses  the  area  where  particular  highly  valued  sports  programming  is  available  to  consumers.  Sports  programming 
 generally  is  available  only  to  consumers  located  within  the  authorized  viewing  zone  for  a  teams  programming.  422  The  relevant  market  does  not  necessarily  encompass  the  entire  RSN  footprint,  because 
 many  RSNs  are  distributed  to  consumers  in  more  than  one  sports  teams  territories,  and  RSNs  often  are  distributed  to  consumers  located  outside  a  particular  teams  authorized  viewing  zones.  423  The  record 
 contains  a  limited  amount  of  information  on  the  viewing  zones  of  individual  sports  teams.  Because  individual  DMAs  usually  are  entirely  encompassed  within  the  authorized  viewing  zone  for  a  teams 
 games  and  contain  those  fans  that  value  its  programming  most  highly,  we  find  it  reasonable  to  define  the  relevant  geographic  market  for  the  analysis  of  harms  concerning  access  to  RSNs  as  any  DMA  that  is 
 home  to  a  sports  team.  424 
 126.  We  reject  DIRECTVs  contention  that  the  appropriate  unit  of  analysis  here  should  be  an  entire  RSN  footprint.  425  Although  we  chose  the  RSN  footprint  as  the  geographic  market  in  the  News 


 Corp.-  Hughes  Order,  we  nonetheless  analyzed  data  from  each  MVPDs  smaller,  individual  service  areas  within  the  RSN  footprint  because  as  noted  by  DIRECTV,  cable  operators  typically  have  a  smaller  service 
 area  than  the  entire  footprint  of  an  RSN.  426  As  noted  above,  an  RSN  may  be  distributed  to  areas  outside 
 420  Applicants  Response  to  DIRECTV  Surreply  at  28-  29;  Time  Warner  Jan.  13,  2006  Response  to  Information 
 Request  II.  E  at  TW  00024596  [REDACTED]  ;  Comcast  Jan.  13,  2006  Response  to  Information  Request  III.  J.  at  COM  III.  J.  000967  [REDACTED]  Letter  from  James  R.  Coltharp,  Comcast  Corp.,  to  Marlene  H.  Dortch,  Secretary, 


 FCC  (Mar.  27,  2006)  (  Comcast  Mar.  27,  2006  Ex  Parte)  at  1  n.  2.  We  also  note  that  the  Applicants  allege  that  lack  of  access  to  RSNs  does  not  depress  DBS  penetration  in  markets  where  such  programming  is  unavailable  to  DBS 
 providers.  Letter  from  Michael  H.  Hammer,  Willkie,  Farr  &  Gallagher,  LLP,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  16,  2006)  (  Applicants  Mar.  16,  2006  Ex  Parte)  at  1-  2.  We  address  this  allegation  below.  See  infra  paras. 
 145-  151.  421 
 Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23267    59;  see  also  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  506    66;  supra  Section  VI.  A.  2.  (explaining  relevant  market  for  video  programming). 


 422  Teams  or  leagues  typically  establish  these  zones. 
 423  For  example,  FSN  North  carries  the  games  of  Minneapolis  and  Milwaukees  professional  baseball  and 
 basketball  teams.  See  Fox  Sports,  FSN-  MN,  at  http://  msn.  foxsports.  com/  regional/  minnesota  (last  visited  June  20,  2006);  see  also  Fox  Sports,  FSN-  WI,  at  http://  msn.  foxsports.  com/  regional/  wisconsin  (last  visited  June  20,  2006). 


 However  each  teams  games  are  not  available  in  the  others  home  territory.  See  Time  Warner  Cable,  Sports  Blackouts,  at  http://  timewarnercable.  com/  piedmonttriad/  products/  cable/  sportsblackouts.  html  (last  visited  June  20, 
 2006).  Contracts  between  sports  teams  and  RSNs  limit  the  distribution  of  games  to  a  specific  viewing  zone  that  does  not  overlap  with  the  exclusive  viewing  zones  of  neighboring  teams  in  the  same  league.  See  DIRECTV, 
 Blackout  Information,  at  http://  www.  directvsports.  com/  Blackout_  Info/  (last  visited  June  20,  2006).  In  addition,  RSN  boundaries  often  change,  depending  on  what  teams  sports  rights  they  gain,  and  with  which  local  cable 
 companies  the  RSNs  are  able  to  negotiate  carriage.  424 
 Our  use  of  DMAs  in  this  context  does  not  conflict  with  our  rejection  of  DMAs  as  a  relevant  geographic  market  for  purposes  of  analyzing  potential  harms  to  MVPD  competition,  because  in  each  case  we  are  examining  the  market 


 within  which  consumers  face  similar  choices.  See  supra  para.  81.  In  the  context  of  MVPD  competition,  we  select  the  franchise  area,  rather  than  the  DMA,  as  the  relevant  market,  because  consumers  may  not  face  similar  choices  in 
 larger  geographic  areas  such  as  DMAs.  Id.  425 
 DIRECTV  Comments  at  8  (citing  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  506;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23267). 


 426  Id.  at  25. 
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 the  authorized  viewing  area  of  a  particular  sports  team  carried  by  that  network,  such  that  some  viewers  within  the  RSN  footprint  would  not  receive  the  same  programming  from  the  RSN  that  other  viewers 
 receive.  Thus,  by  analyzing  data  from  each  MVPDs  smaller,  individual  service  areas  within  the  RSN  footprint,  we  were  able  to  assess  the  transactions  impact  in  areas  where  all  viewers  are  receiving  similar 
 RSN  programming.  427  Although  DIRECTVs  (and  EchoStars)  service  areas  are  large  enough  to  provide  service  throughout  the  entire  RSN  footprint,  we  believe  we  must  narrow  the  unit  of  analysis  here  to  the 
 DMA  in  order  to  assess  more  accurately  the  impact  of  the  transactions.  Using  the  DMA  allows  us  here,  as  we  did  in  News  Corp.-  Hughes,  to  examine  the  geographic  area  in  which  consumers  are  likely  to  place  a 
 similar  value  on  the  RSN  programming  at  issue  and  to  examine  the  transactions  impact  in  areas  where  viewers  are  likely  to  receive  the  same  RSN  programming.  In  addition,  we  note  that  because  Applicants 
 may  use  a  zone  pricing  system  for  their  RSNs,  428  it  would  be  possible  for  the  Applicants  to  engage  in  a  uniform  price  increase  strategy  that  is  limited  to  one  of  the  zones  of  the  RSN  footprint.  And,  since  the 
 inner  zone,  which  is  the  area  where  the  highly  valued  sports  programming  is  likely  to  be  shown,  contains  the  consumers  that  value  the  programming  most  highly,  it  is  also  the  area  where  a  uniform  price  increase 
 is  most  likely  to  be  profitable.  We  therefore  believe  that  DMAs  that  are  home  to  a  professional  sports  team,  which  plays  in  either  Major  League  Baseball,  the  National  Basketball  Association,  the  National 
 Football  League,  or  the  National  Hockey  League,  carried  on  the  RSN  are  a  reasonable  approximation  of  the  inner  pricing  zone  of  the  RSN. 


 127.  Our  analysis  extends  beyond  those  markets  where  the  Applicants  currently  own  RSNs.  429  As  DIRECTV  has  noted,  the  Applicants  expanded  regional  clusters  may  provide  them  with  an  increased 
 incentive  and  ability  to  launch  their  own  RSNs  in  those  areas.  430  Thus,  in  assessing  the  areas  likely  to  see  the  most  significant  impact  of  the  transactions,  we  examine  all  DMAs  that  are  home  to  professional  sports 
 teams  where  Comcast  or  Time  Warner  would  own  cable  systems  post-  transaction.  There  appear  to  be 


 427  See  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  506    66. 
 428  For  example,  CSN  West  uses  a  zone  pricing  system,  in  which  the  price  per  subscriber  is  highest  in  the  inner 
 zone,  less  in  the  outer  zone,  and  least  in  the  outermost  zone.  See  infra  para.  134.  429 
 Thus,  we  do  not  address  DIRECTVs  argument  that  the  Applicants  have  understated  the  effects  of  the  transactions  even  if  the  analysis  focuses  only  on  the  markets  in  which  Comcast  and  Time  Warner  currently  own 


 RSNs.  DIRECTV  Surreply  at  11-  12,  Lexecon  Report  at  8-  11.  The  Applicants  RSNs  include  Comcast  SportsNet  Chicago  (  CSN  Chicago);  Comcast  SportsNet  West  (  CSN  West);  Comcast  SportsNet  Mid-  Atlantic  (  CSN  Mid-Atlantic); 
 Comcast/  Charter  Sports  Southeast;  and  Comcast  Local  Detroit.  Applicants  Reply  at  58-  59;  Public  Interest  Statement  at  17  n.  37;  Bill  Griffin,  FSN  Shake-  up  Opens  Door  for  Comcast?,  THE  BOSTON  GLOBE,  Feb.  25, 
 2005,  at  http://  www.  boston.  com/  sports/  other_  sports/  articles/  2005/  02/  25/  fsn_  shake_  up_  opens_  door_  for_  comcast?  mode=  PF 
 (last  visited  June  20,  2006).  The  Applicants  do  not  include  the  markets  served  by  SportsNet  New  York,  Comcast  Local  Detroit,  or  Fox  Sports  New  England  in  their  analysis  of  the  transaction-  related  effects.  Cf.  Applicants  Reply 
 at  58-  59  (displaying  calculations  for  five  RSNs,  not  including  the  RSNs  in  New  York,  Detroit  or  New  England).  430 
 DIRECTV  states  that  the  Commission  must  consider  the  transactions  impact  in  any  market  in  which  Comcast  or  Time  Warner  could  own  an  RSN  in  the  future,  claiming  that  the  significant  clustering  resulting  from  the  sale  would 


 place  Comcast  and  Time  Warner  in  a  better  position  to  lure  sports  teams  away  from  News  Corp.  s  RSNs  by  enticing  them  with  a  share  of  their  monopoly  rents.  DIRECTV  Comments  at  10-  11  n.  36,  20-  21;  DIRECTV  Surreply  at  7-  8; 
 Letter  from  William  M.  Wiltshire,  Michael  D.  Nilsson,  S.  Roberts  Carter  III,  Harris,  Wiltshire  &  Grannis  LLP,  Counsel  for  DIRECTV,  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Apr.  3,  2006)  (  DIRECTV  Apr.  3,  2006  Ex 
 Parte)  at  2.  In  support  of  this  argument,  DIRECTV  cites  Comcasts  creation  of  CSN  Chicago  and  CSN  West  following  its  acquisition  of  the  AT&  T  Broadband  cable  systems.  DIRECTV  Surreply  at  7-  8.  Comcast  explains  that 
 the  owner  of  the  cable  systems  in  those  regions  had  exactly  the  same  incentive  and  ability  to  engage  (or  not  engage)  in  foreclosure  before  and  after  the  AT&  T  Broadband/  Comcast  transaction.  Letter  from  James  R.  Coltharp, 
 Comcast  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Apr.  28,  2006)  (  Comcast  Apr.  28,  2006  Ex  Parte)  (emphasis  in  original)  at  5.  DIRECTV  states  that  Comcast  dramatically  increased  prices  charged  to  competing 
 MVPDs  for  carriage  of  these  RSNs  after  acquiring  the  networks.  DIRECTV  Surreply  at  7-  8. 
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 opportunities  for  new  RSNs  to  emerge  in  some  markets  even  though,  as  Applicants  have  stated,  many  sports  teams  have  long-  term  contractual  commitments  with  existing  RSNs.  431  For  example,  in  Los 
 Angeles,  it  appears  that  the  L.  A.  Clippers  and  Anaheim  Mighty  Ducks  contracts  with  Fox  SportsNet  West  and  Fox  SportsNet  West  2  could  expire  as  early  as  2007  or  2008.  432  In  addition,  some  sports  teams 
 may  have  the  option  of  terminating  their  existing  agreements  (subject  to  certain  penalties)  to  seek  more  lucrative  deals.  433  In  the  alternative,  MVPDs  may  obtain  valuable  sports  rights  simply  by  acquiring  an 
 RSN.  434 
 128.  To  the  extent  that  Applicants  believe  that  their  acquisition  of  cable  systems  in  markets  where  they  do  not  already  own  an  RSN  is  unrelated  to  the  incentive  or  ability  to  gain  sports  distribution 


 rights  in  those  markets,  we  disagree.  435  It  is  the  combination  of  RSN  ownership  and  MVPD  market  share 


 431  Applicants  assert  that  our  analysis  should  be  limited  to  those  markets  where  they  currently  own  RSNs,  because 
 long-  term  contracts  between  sports  teams  and  incumbent  RSNs  preclude  them  from  luring  teams  away  to  launch  their  own  RSNs  in  new  markets.  Applicants  Response  to  DIRECTV  Surreply  at  19-  21.  Applicants  explain  that  in 


 Los  Angeles  and  Miami,  for  example,  most  sports  teams  have  contracts  with  News  Corp.  s  RSNs  until  2010  (with  the  exceptions  in  Los  Angeles  noted  above).  Id.  at  20;  see  also  Letter  from  Martha  E.  Heller,  Wiley,  Rein  & 
 Fielding  LLP,  Counsel  for  Comcast  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  24,  2006)  (  Comcast  Mar.  24,  2006  Ex  Parte)  at  8-  9.  However,  it  does  not  appear  that  such  contracts  are  necessarily  a  bar  to  the  creation  of 
 new  RSNs.  [REDACTED]  Comcast  Apr.  7,  2006  Response  to  Information  Request  III.  J.,  Att.  at  unnumbered  1.  Yet  in  2004,  Comcast  signed  agreements  to  carry  the  games  of  those  same  teams  on  its  own  RSN,  CSN  Chicago. 
 Don  Steinberg,  Comcast  SportsNets  Growth  Spurt,  PHILADELPHIA  INQUIRER,  Oct.  1,  2004,  at  D02.  432 
 Applicants  Response  to  DIRECTV  Surreply  at  21.  433 
 For  example,  in  2004,  the  New  York  Mets  paid  $54  million  to  end  a  contract  with  Madison  Square  Garden  Networks,  which  enabled  the  creation  of  SportsNet  New  York.  Richard  Sandomir,  Cablevision  Takes  Mets  to 


 Court,  N.  Y.  TIMES,  Oct.  28,  2004,  at  http://  www.  nytimes.  com/  2004/  10/  28/  sports/  baseball/  28cablevision.  html?  ei=  5088&  en=  9cfa5178c260283e&  ex=  125 
 6702400&  adxnnl=  1&  partner=  rssnyt&  adxnnlx=  1114171725-  Wd0IQXYBoPpsUIuzdiiGQg  (last  visited  June  20,  2006).  Moreover,  Time  Warner  documents  show  that  it  is  aware  that  the  marketplace  to  obtain  ownership  rights  to 
 distribute  regional  sports  programming  is  dynamic.  Time  Warner  Mar.  14,  2006  Response  to  Information  Request  III.  J.  at  TW  FCC2  00000559  [REDACTED]  ;  Time  Warner  Mar.  14,  2006  Response  to  Information  Request  III.  J. 
 at  eTW  FCC2  00003991-  3993  [REDACTED]  .  434 
 For  example,  Fox  Cable  Networks  recently  purchased  the  Turner  South  programming  network  from  Time  Warners  Turner  Broadcasting  System,  Inc.  Turner  South  has  long-  term  broadcast  rights  to  the  MLBs  Atlanta 


 Braves,  the  NHLs  Atlanta  Thrashers,  and  the  NBAs  Atlanta  Hawks.  Time  Warner  Mar.  3,  2006  Ex  Parte  at  1,  Att.  at  1.  Further,  [REDACTED]  .  Time  Warner  Mar.  2,  2006  Response  to  Information  Request  III.  J.  at  TW  FCCM 
 0028  [REDACTED]  ;  see  also  Letter  from  Arthur  H.  Harding,  Fleischman  &  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Apr.  8,  2006)  (  Time  Warner  Apr.  8,  2006  Ex  Parte)  5;  Anthony 
 Castrovince,  Fans  to  Have  More  Access  to  Games:  Fastball  Sports  to  Produce  Largest  TV  Package  in  Tribe  History,  Major  League  Baseball,  Dec.  26,  2005,  at 
 http://  mlb.  mlb.  com/  NASApp/  mlb/  news/  article.  jsp?  ymd=  20051208&  content_  id=  1279170&  vkey=  news_  mlb&  fext=.  jsp&  c_  id=  mlb.  (last  visited  June  20,  2006). 


 435  Applicants  assert  that  vertical  integration  is  not  necessary  to  enable  an  MVPD  to  lure  sports  teams  away  from 
 incumbent  RSNs,  citing  News  Corp.  s  acquisition  of  sports  distribution  rights  held  by  a  Detroit  RSN  to  create  Fox  Sports  Net  Detroit.  Applicants  Response  to  DIRECTV  Surreply  at  26-  27;  see  also  id.  at  28-  29  (describing  News 


 Corp.  s  creation  of  FSN  West  2,  a  spin-  off  of  FSN  West,  in  order  to  draw  additional  license  fees);  Comcast  Mar.  24,  2006  Ex  Parte  at  8-  9.  The  Applicants  state  that  News  Corp.  s  conduct,  which  occurred  before  News  Corp.  s 
 affiliation  with  DIRECTV,  demonstrates  that  News  Corp.  was  a  potent  competitor  for  sports  rights  even  before  it  was  vertically  integrated.  Applicants  Response  to  DIRECTV  Surreply  at  28-  29.  Furthermore,  the  Applicants 
 explain  that  the  Bureau  of  Competition  at  the  Federal  Trade  Commission  investigated  whether  the  transactions  would  impact  the  availability  of  RSNs  and  that  the  majority  concluded  that  evidence  did  not  indicate  that  the 
 proposed  transactions  .  .  .  are  likely  to  reduce  competition  in  any  relevant  geographic  market,  and  that  the  proposed  transactions  are  unlikely  to  make  the  hypothesized  foreclosure  or  cost-  sharing  strategies  profitable  for 
 (continued.) 
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 that  makes  anticompetitive  strategies  possible.  Where  Comcasts  and  Time  Warners  cable  systems,  post-transaction,  reach  a  sufficient  percentage  of  any  DMA  that  is  home  to  a  sports  team,  the  potential  gains 
 from  these  strategies  could  be  sufficient  to  justify  the  costs  of  employing  them,  including  the  cost  to  acquire  the  sports  programming  rights. 


 129.  Having  established  the  strategic  importance  of  RSN  programming  to  MVPDs  and  the  appropriate  geographic  framework  for  the  evaluation  of  potential  public  interest  harms,  we  now  turn  to 
 our  assessment  of  claims  regarding  specific  anticompetitive  strategies.  We  consider  the  likelihood  of  harms  deriving  from  a  strategy  to  uniformly  increase  the  rates  paid  by  all  MVPDs,  to  engage  in  stealth 
 discrimination,  and  to  permanently  and  temporarily  foreclose  RSN  programming. 
 (ii)  Theories  of  Harm 
 130.  Positions  of  the  Parties:  Uniform  Price  Increase.  DIRECTV  alleges  that  the  transactions  would  enable  Comcast  and  Time  Warner  to  harm  competing  MVPDs  by  increasing  the  rates  for  affiliated 


 RSNs  uniformly  to  all  MVPDs,  including  themselves.  DIRECTV  states  that  even  modest  increases  in  Comcasts  or  Time  Warners  market  share  could  make  a  uniform  price  increase  strategy  profitable  and 
 thereby  harm  competition.  According  to  DIRECTV,  as  a  cable  operators  footprint  expands,  it  may  claim  more  of  the  DBS  subscribers  who  switch  MVPDs  in  order  to  have  access  to  RSN  programming.  436  At  the 
 same  time,  a  DBS  provider  that  refuses  to  accept  a  price  increase  from  an  integrated  cable  operator/  RSN  owner  stands  to  lose  more  and  more  subscribers  as  that  cable  operators  footprint  expands.  DIRECTV 
 contends  that,  under  such  circumstances,  the  DBS  provider  may  lose  less  by  accepting  a  price  increase  than  it  would  by  refusing  to  carry  the  RSN  programming  at  a  higher  price,  asserting  that  the  market  share 
 of  DBS  firms  is  significantly  lower  in  areas,  such  as  Philadelphia,  where  they  do  not  have  access  to  an  RSN.  437  DIRECTV  alleges  that  Comcast  has  in  the  past  imposed  a  uniform  price  increase  for  CSN 
 Chicago,  which  Comcast  created  after  it  acquired  AT&  T  Broadbands  cable  system  in  Chicago.  DIRECTV  contends  that  Comcast  charges  almost  twice  as  much  as  the  previous  RSN  that  sold  the  same 
 programming.  438  DIRECTV  also  contends  that  Time  Warner  and  Comcast  intend  to  make  programming  on  SportsNet  New  York  the  nations  most  expensive  RSN  programming  on  a  per  subscriber  basis.  439 
 Moreover,  DIRECTV  contends  that  the  transactions  would  increase  the  incentive  to  increase  prices  uniformly,  because  Comcast  is  also  a  co-  owner  of  SportsNet  New  York  and  would  acquire  an  additional 
 10%  of  television  households  in  that  RSNs  footprint.  440 
 (Continued  from  previous  page)  either  Comcast  or  [Time  Warner].  Letter  from  James  R.  Coltharp,  Comcast  Corp.,  Steven  N.  Teplitz,  Time  Warner 
 Inc.,  Michael  Hammer,  Willkie  Farr  &  Gallagher,  LLP,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Feb.  9,  2006)  at  1.  436 
 DIRECTV  Surreply  at  12.  437 
 Id.  at  12-  13.  DIRECTV  explains  that  once  the  DBS  provider  accedes  to  the  price  increase,  other  cable  operators  in  that  RSN  footprint  can  no  longer  refuse  carriage  without  penalty,  because  their  subscribers  would  have  an 


 alternative  source  for  obtaining  the  RSN  programming.  Id.  at  13  (citing  DIRECTV  Surreply,  Lexecon  Report  at  15);  see  also  Letter  from  William  M.  Wiltshire,  Harris,  Wiltshire  &  Grannis,  LLP,  Counsel  for  DIRECTV,  Inc.,  to 
 Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  17,  2006)  at  1,  3  (updating  DBS  penetration  regression  analysis  with  current  data). 


 438  DIRECTV  Comments  at  20. 
 439  DIRECTV  Surreply  at  9;  DIRECTV  Apr.  3,  2006  Ex  Parte  at  8.  Nonetheless,  DIRECTV  carries  SportsNet  New 
 York.  See  DIRECTV,  at  http://  www.  directv.  com/  DTVAPP/  see/  SportsNetwork_  chanDescriptions.  jsp  (last  visited  June  20,  2006).  Moreover,  we  note  that  RCN  also  has  agreed  to  purchase  SportsNet  New  York  programming  for  its 


 customers.  RCN,  RCN  Set  to  Launch  SportsNet  New  York  on  April  1,  RCN  to  Carry  Networks  Professional  Team  Coverage  of  the  Mets  &  Jets,  SportsNet  New  York  Offers  Comprehensive  Local  New  York  Sports  News 
 Programming  (press  release),  Mar.  31,  2006.  440 
 Letter  from  William  M.  Wiltshire,  Harris,  Wiltshire  &  Grannis,  LLP,  Counsel  for  DIRECTV,  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Apr.  13,  2006)  (  DIRECTV  Apr.  13,  2006  Ex  Parte)  at  5. 
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 131.  Applicants  assert  that  DIRECTV  has  not  provided  evidence  that  the  transactions  would  create  sufficient  incentives  to  raise  prices  uniformly.  441  According  to  the  Applicants,  this  strategy  could 
 cause  non-  competing  MVPDs  to  drop  an  RSN  in  response  to  a  price  increase,  making  the  RSN  unavailable  in  large  portions  of  a  service  area.  442  Applicants  also  refute  claims  that  their  alleged 
 foreclosure  strategies  stunt  DBS  penetration,  explaining  that  several  DMAs  have  lower  DBS  penetration  than  Philadelphia.  443  With  regard  to  CSN  Chicago,  Comcast  contends  that  its  acquisition  of  AT&  T 
 Broadbands  cable  systems  in  Chicago  did  not  increase  incentives  to  create  RSN  programming  it  could  withhold  from  MVPD  competitors.  444  Applicants  further  maintain  that  the  prices  DIRECTV  complains  of 
 for  CSN  Chicago  programming  are  substantially  identical  to  the  prices  charged  by  the  RSN  that  used  to  provide  CSN  Chicagos  programming  to  Comcast  and  other  cable  operators.  445  In  addition,  Comcast 
 contends  that  the  price  it  charges  for  SportsNet  New  York  is  reasonable  and  below  that  charged  by  the  YES  Network,  an  RSN  in  New  York  that  carries  New  York  Yankees  games.  446  Moreover,  Time  Warner 
 asserts  that  the  alleged  harms  with  respect  to  SportsNet  New  York  are  not  transaction  specific,  because  Time  Warner  is  acquiring  only  a  small  number  of  subscribers  in  SportsNet  New  Yorks  footprint.  447 


 132.  Stealth  Discrimination.  DIRECTV  and  other  parties  contend  that  the  transactions  would  increase  the  likelihood  that  Comcast  or  Time  Warner  will  attempt  to  raise  the  costs  of  rival 
 MVPDs  by  raising  prices  for  affiliated  RSNs  in  a  discriminatory  fashion  that  does  not  overtly  violate  the  Commissions  program  access  rules.  According  to  DIRECTV,  Comcast  has  used  this  strategy  in 
 Sacramento  with  respect  to  CSN  West,  which  imposed  terms  and  conditions  of  service  that  appeared  to  be  nondiscriminatory  on  their  face  but  nevertheless  have  allegedly  had  a  discriminatory  effect  on  DBS 
 providers.  448  Noting  that  this  conduct  is  a  variation  on  uniform  overcharge  pricing,  449  DIRECTV  states  that  the  program  access  rules  do  not  necessarily  constrain  CSN  West  from  setting  its  prices  in  this 
 manner,  which  it  refers  to  as  stealth  price  discrimination.  450  Applicants  reject  these  contentions. 
 133.  DIRECTV  charges  that  Comcasts  discriminatory  pricing  strategies  with  respect  to  CSN  West  are  indicative  of  strategies  Comcast  and  Time  Warner  are  likely  to  employ  elsewhere  as  a  result  of 


 the  transactions.  451  According  to  DIRECTV,  CSN  West  has  a  three-  zone  pricing  structure,  with  the  price 
 441  Applicants  Reply  at  61. 
 442  Id.;  Letter  from  Arthur  H.  Harding,  Fleischman  &  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H. 
 Dortch,  Secretary,  FCC  (Apr.  8,  2006)  (  Time  Warner  Apr.  8,  2006  Ex  Parte)  at  2-  4.  443 
 Letter  from  Michael  H.  Hammer,  Willkie  Farr  &  Gallagher,  LLP,  Counsel  for  Adelphia  Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  7,  2006)  at  2-  3.  Comcast  notes  that  in  each  of  the  DMAs  with 


 comparable  penetration,  DBS  operators  carry  the  RSN.  Comcast  Mar.  27,  2006  Ex  Parte  at  3.  Furthermore,  Comcast  explains  that  DIRECTVs  analysis  of  how  access  to  an  RSN  relates  to  DBS  penetration  was  flawed 
 because  it  did  not  consider  cable  system  quality  and  average  cable  prices,  and  that  the  small  number  of  cable-  only  exclusives  made  economic  modeling  difficult.  Comcast  Mar.  27,  2006  Ex  Parte  at  2. 


 444  Comcast  Apr.  28,  2006  Ex  Parte  at  5. 
 445  Applicants  Response  to  DIRECTV  Surreply  at  23;  Comcast  Mar.  24,  2006  Ex  Parte  at  6-  7. 
 446  Comcast  Mar.  24,  2006  Ex  Parte  at  7. 
 447  Time  Warner  Apr.  8,  2006  Ex  Parte  at  4. 
 448  DIRECTV  Comments  at  23-  25. 
 449  Id.  at  25  n.  66. 
 450  Id.  at  23,  25. 
 451  DIRECTV  observes  that  CSN  West  was  created  after  Comcast  acquired  cable  systems  serving  CSN  Wests 
 footprint  from  AT&  T  Broadband.  Letter  from  William  M.  Wiltshire,  Michael  D.  Nilsson,  S.  Roberts  Carter  III,  Harris,  Wiltshire  &  Grannis,  LLP,  Counsel  for  DIRECTV,  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Feb.  14, 


 2006)  (  DIRECTV  Feb.  14,  2006  Ex  Parte)  at  4. 
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 per  subscriber  highest  in  the  inner  zone,  less  in  the  outer  zone,  and  least  in  the  outer  outer  zone.  In  order  to  obtain  CSN  West,  DIRECTV  alleges  that  it  is  required  to  carry  (and  pay  for)  its  programming  in 
 the  outermost  zone,  even  though  the  RSN  does  not  have  rights  to  carry  the  Sacramento  Kings  in  that  zone.  DIRECTV  says  that  as  a  result,  it  is  paying  license  fees  for  subscribers  who  cannot  receive  the  Kings 
 games,  thus  inflating  the  total  price  that  DIRECTV  must  pay  to  obtain  CSN  West  for  those  subscribers  that  can  view  the  Kings  games.  452  While  CSN  West  apparently  distributes  other  programming, 
 including  the  Sacramento  Monarchs  and  NCAA  basketball,  DIRECTV  alleges  that  the  Kings  are  the  only  mens  professional  sports  team  carried  by  the  RSN.  453  DIRECTV  has  almost  twice  as  many  subscribers 
 in  the  outermost  zone  as  it  does  in  the  inner  and  outer  zones,  so  that  the  effective  rate  of  carrying  the  RSN  per  subscriber  that  can  receive  the  Kings  games  is  high,  according  to  DIRECTV.  454  By  contrast, 
 DIRECTV  alleges,  cable  operators  franchise  areas  are  rarely  greater  than  one  of  the  zones.  Therefore,  a  cable  operator  in  the  outermost  zone  can  simply  make  the  decision  not  to  carry  the  network.  455 
 DIRECTV  concedes  that  larger  cable  MSOs  in  the  region  that  can  also  be  required  to  carry  CSN  West  in  all  three  zones  would  be  similarly  affected,  but  it  asserts  that  Comcast,  which  reaches  over  97%  of 
 subscribers  in  the  outermost  zone,  would  be  insulated  from  these  effects  because  the  overcharge  to  itself  is  merely  an  intra-  company  transfer.  456  Comcast  explains  that  the  NBA  authorizes  CSN  West  to 
 distribute  Sacramento  Kings  games  only  to  certain  geographic  areas.  Accordingly,  Comcast  states  that  it  uses  pricing  zones  to  charge  more  for  programming  in  the  NBA-  approved  viewing  zones  and  less  for  the 
 programming  in  geographic  areas  outside  of  NBA-  approved  viewing  zones,  where  the  Kings  games  cannot  be  carried.  457  Comcast  explains  that  it  charges  MVPDs  according  to  this  price  zone  structure 
 throughout  the  MVPDs  service  area  and  does  not  allow  MVPDs  to  pick  and  choose  the  areas  in  which  they  must  distribute  the  service.  458 


 134.  Permanent  Foreclosure.  Commenters  also  allege  that  the  transactions  would  likely  result  in  the  withholding  of  RSNs  by  the  use  of  exclusive  distribution  agreements  that  foreclose  competing 
 MVPDs  from  access  to  the  programming,  as  is  already  done  with  respect  to  CSN  Philadelphia,  a  terrestrially  delivered  RSN.  459  DIRECTV  states  that  Comcasts  and  Time  Warners  additional  retail 
 market  share  resulting  from  the  transactions  would  make  permanent  foreclosure  of  regional  programming  more  likely,  that  the  transactions  would  dramatically  increase  the  number  of  markets  in  which  such  a 
 strategy  would  be  economically  rational,  and  that  Comcast  has  recently  put  in  place  a  nationwide  fiber  network  that  could  be  used  to  deliver  programming  terrestrially.  460  DIRECTV  and  MAP  assert  that 


 452  DIRECTV  Comments  at  24. 
 453  Id.  at  23. 
 454  Id.  at  24. 
 455  Id.  at  25;  DIRECTV  Surreply,  Lexecon  Report  at  16-  17. 
 456  DIRECTV  Comments  at  25. 
 457  Applicants  Response  to  DIRECTV  Surreply  at  24-  25;  Comcast  Mar.  24,  2006  Ex  Parte  at  7. 
 458  Applicants  Response  to  DIRECTV  Surreply  at  24. 
 459  DIRECTV  Comments  at  16-  17;  EchoStar  Comments  at  4-  5  (stating  that  because  the  transactions  would  expand 
 the  Philadelphia  cluster  and  give  Comcast  other  Pennsylvania  cable  systems,  Comcast  will  have  a  greater  incentive  to  withhold  its  affiliated  RSN  programming);  RCN  Comments  at  11-  12  (stating  that  although  RCN  now  carries  CSN 


 Philadelphia,  Comcast  was  unwilling  to  negotiate  carriage  for  several  years  following  launch  of  the  network,  and  it  charges  higher  prices  to  RCN  than  to  other  MVPDs  for  affiliated  programming  in  general). 


 460  DIRECTV  Comments  at  17;  DIRECTV  Surreply  at  4-  5  (citing  Program  Access  Order,  17  FCC  Rcd  at  12140 
   38).  DIRECTV  also  notes  that  the  transactions  would  decrease  the  number  of  subscribers  that  would  need  to  switch  in  order  to  make  the  strategy  more  profitable.  DIRECTV  Apr.  3,  2006  Ex  Parte  at  7.  EchoStar  asserts  that 


 because  the  transactions  also  would  expand  Time  Warners  clusters  in  various  regions,  Time  Warner  could  acquire  (continued.) 
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 [REDACTED]  461  DIRECTV  claims  that,  based  on  its  own  calculations,  a  strategy  of  permanent  withholding  of  CSN  West  would  be  profitable  if  [REDACTED]  of  DBS  subscribers  switched  to 
 Comcast  to  obtain  the  RSN.  462  DIRECTV  asserts  that  the  strategy  also  would  be  profitable  in  CSN  Mid-Atlantics  footprint  if  [REDACTED]  of  DBS  subscribers  switched  to  Comcast.  463  In  response,  Comcast 
 asserts  that  DIRECTV  has  not  alleged  a  transaction-  specific  harm  for  any  Comcast-  affiliated  RSN  except  possibly  CSN  Mid-  Atlantic.  464  Comcast  asserts  that  DIRECTVs  analysis  with  respect  to  that  network 
 has  failed  to  produce  any  evidence  that  would  justify  the  imposition  of  RSN-  related  conditions.  According  to  Comcast,  even  assuming  the  validity  of  the  analysis,  which  it  disputes,  the  analysis 
 concludes  that  for  permanent  foreclosure  to  be  worthwhile,  Comcast  would  need  to  gain  an  implausibly  high  number  of  subscribers.  465  Further,  Comcast  rejects  as  purely  speculative  DIRECTVs  analyses  of 
 markets  in  which  neither  Comcast  nor  Time  Warner  has  an  ownership  interest  in  any  RSN  --  markets  in 


 (Continued  from  previous  page)  RSN  assets  in  the  future  and  would  have  equally  strong  incentives  to  withhold  RSN  programming.  EchoStar 
 Comments  at  5-  6.  461 
 Letter  from  William  M.  Wiltshire,  Michael  D.  Nilsson,  &  S.  Roberts  Carter  III,  Harris,  Wiltshire  &  Grannis,  LLP,  Counsel  for  DIRECTV,  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  1,  2006)  (  DIRECTV  Mar.  1,  2006 


 Ex  Parte)  at  5,  Further  Statement  of  Bamberger  &  Neumann  at  16    34;  DIRECTV  Feb.  14,  2006  Ex  Parte  at  3-  6;  Letter  from  William  M.  Wiltshire,  Michael  D.  Nilsson,  and  S.  Roberts  Carter  III,  Harris,  Wiltshire  &  Grannis,  LLP, 
 Counsel  for  DIRECTV,  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Apr.  6,  2006)  (  DIRECTV  Apr.  6,  2006  Ex  Parte)  at  7  (citing  COM  IIIJ  000206  [REDACTED]  ;  Letter  from  Harold  Feld,  Senior  Vice  President,  Media 
 Access  Project,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Feb.  23,  2006)  (  MAP  Feb.  23,  2006  Ex  Parte)  at  Att.  B  at  2-  3.  [REDACTED]  MAP  Feb.  23,  2006  Ex  Parte  at  Att.  B  at  3.  [REDACTED]  Comcast  Apr.  28,  2006  Ex  Parte 
 at  9-  10  n.  39.  462 
 DIRECTV  Mar.  1,  2006  Ex  Parte,  Further  Statement  of  Bamberger  &  Neumann  at  16    33-  34.  463 
 Id.  at  15    32.  464 
 Letter  from  James  R.  Coltharp,  Comcast  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  15,  2006)  (  Comcast  Mar.  15,  2006  Ex  Parte)  at  2.  According  to  Comcast,  DIRECTV  acknowledges  that  there  can  be  no 


 transaction-  specific  effects  relating  to  CSN  Philadelphia  or  Comcast/  Charter  Sports  Southeast,  because  DBS  operators  do  not  currently  carry  either  network.  According  to  Comcast,  DIRECTV  does  not  even  attempt  to  do  a 
 post-  transaction  analysis  of  foreclosure  in  the  CSN  West  footprint,  because  the  transactions  would  not  substantially  alter  Comcasts  market  share  in  that  market.  Further,  Comcast  states  that  while  DIRECTV  complained  it  had 
 insufficient  data  to  conduct  foreclosure  analyses  for  other  Comcast-  affiliated  RSNs,  including  CSN  Chicago,  Fox  Sports  New  England,  and  SportsNet  New  York,  such  analyses  should  not  bear  on  the  FCCs  consideration  of  the 
 transactions  because  (1)  Comcast  is  not  acquiring  any  systems  in  CSN  Chicagos  footprint;  (2)  Fox  Sports  New  England  is  managed  by  a  subsidiary  of  Cablevision,  not  by  Comcast;  and  (3)  SportsNet  New  York  had  not  yet 
 launched,  so  there  would  be  insufficient  data  for  analysis.  Id.  at  3-  4.  We  note  that  SportsNet  New  York  launched  on  March  16,  2006.  See  supra  note  32. 


 465  Comcast  Mar.  15,  2006  Ex  Parte  at  8;  Comcast  Mar.  24,  2006  Ex  Parte  at  3.  According  to  Comcast,  based  on 
 ratings  data  for  the  first  three  quarters  of  2005  for  the  Baltimore  and  Washington  DMAs  and  assuming  that  DBS  subscribers  watch  CSN  Mid-  Atlantic  in  approximately  the  same  proportions  as  other  viewers,  [REDACTED]  of 


 CSN  Mid-  Atlantics  DBS  viewers  would  need  to  switch  for  a  permanent  foreclosure  strategy  to  be  profitable.  Comcast  Mar.  15,  2006  Ex  Parte  at  8.  Comcast  adds  that,  according  to  DIRECTVs  analysis,  far  fewer  DBS 
 subscribers  [REDACTED]  would  need  to  switch  to  make  temporary  foreclosure  profitable.  The  fact  that  it  is  not  using  a  temporary  foreclosure  strategy,  Comcast  claims,  indicates  that  it  will  not  have  the  incentive  to  withhold  CSN 
 Mid-  Atlantic  when  far  more  viewers  would  need  to  switch  to  make  it  profitable.  Comcast  Mar.  15,  2006  Ex  Parte  at  8.  Comcast  also  asserts  that  DIRECTV  has  failed  to  present  concrete  evidence  of  the  pre-  transaction  critical  value 
 (or  tipping  point  at  which  foreclosure  switches  from  being  unprofitable  to  profitable),  the  post-  transaction  critical  value,  and  the  likely  level  of  switching  to  result  from  temporarily  withholding  the  particular  RSN  at  issue.  Comcast 
 Mar.  15,  2006  Ex  Parte  at  4-  5.  Comcast  further  asserts  that  the  analysis  shows  that  the  point  at  which  temporary  foreclosure  allegedly  would  become  profitable  for  Comcast  is  essentially  identical  pre-  and  post-  transaction. 
 Comcast  Mar.  15,  2006  Ex  Parte  at  4-  5;  Comcast  Mar.  24,  2006  Ex  Parte  at  3. 
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 which  DIRECTV  claims  the  transactions  will  enable  the  Applicants  to  secure  sports  team  rights  currently  locked  up  by  other  distributors  in  order  to  launch  new  RSNs.  466 
 135.  With  respect  to  allegations  that  it  will  adopt  a  strategy  of  terrestrial  distribution  of  its  affiliated  RSNs,  Comcast  counters  that  it  uses  a  terrestrial  distribution  network  for  only  one  regional 
 sports  network,  CSN  Philadelphia,  and  that  the  business  case  for  doing  so  is  unique  to  that  market.  467  It  explains  that  when  the  RSN  was  created,  there  was  a  pre-  existing  regional  network  with  a  terrestrial 
 distribution  system  already  in  place.  The  pre-  existing  network  planned  to  cease  operations,  and  the  terrestrial  distribution  network  it  had  used  was  capable  of  reaching  all  MVPD  licensees  that  Comcast 
 wished  to  reach  with  its  new  network.  Comcast  asserts  that  it  has  found  satellite  distribution  to  be  more  efficient  and  cost-  effective  in  all  other  situations  to  date,  explaining  that  its  regional  sports  networks  are 
 typically  delivered  to  a  wide  geographic  region,  which  is  generally  determined  by  the  areas  in  which  the  network  has  obtained  the  rights  to  distribute  the  underlying  sports  programming.  468  Comcast  states  that 
 the  deployment  and  extension  of  terrestrial  networks  is  highly  capital  intensive  and  that  it  generally  has  found  satellite  delivery  to  be  the  most  economical  method  of  serving  the  large  geographic  areas  that  RSNs 
 typically  serve.  469  In  addition,  Comcast  asserts  that  it  would  suffer  adverse  regulatory  consequences  if  it  were  to  deliver  RSNs  terrestrially  and  withhold  them  from  competitors.  470 


 136.  Temporary  Foreclosure.  Commenters  cite  the  News  Corp.-  Hughes  Order  in  support  of  arguments  that  the  transactions  are  likely  to  facilitate  temporary  foreclosure.  DIRECTV  notes  that 
 temporary  withholding  can  occur  whenever  there  is  an  impasse  in  carriage  negotiations  and  that  the  practice  is  not  illegal  under  existing  regulations,  including  the  program  access  rules.  471  DIRECTV  states 
 that  the  risk  of  temporary  withholding  is  even  greater  here  than  it  was  in  the  News  Corp.-  Hughes  transaction  because  (1)  Applicants  have  a  much  greater  share  of  several  regional  markets  than  did 
 DIRECTV  at  that  time;  and  (2)  Applicants  have  demonstrated  their  willingness  to  engage  in  anticompetitive  tactics,  as  demonstrated  by  Comcasts  alleged  stealth  discrimination  in  Sacramento.  472 


 137.  The  Applicants  assert  that  the  instant  transactions  differ  significantly  from  the  News  Corp.-  Hughes  transaction,  in  which  the  Commission  found  that  there  were  no  reasonably  available 
 substitutes  for  News  Corp.  s  RSN  programming  and  that  ownership  of  that  programming  would  give  DIRECTV  significant  market  power  in  the  relevant  geographic  markets.  473  The  Applicants  explain  that 
 the  acquisition  by  News  Corp.  of  an  interest  in  DIRECTV  created  an  entirely  new  vertical  relationship  between  the  nations  largest  DBS  provider  with  the  leading  owner  of  RSNs,  while  the  instant 


 466  Comcast  Mar.  15,  2006  Ex  Parte  at  9-  10  (citing  DIRECTV  Mar.  1,  2006  Ex  Parte  at  7,  Further  Statement  of 
 Bamberger  &  Neumann  at  12-  13.)  467 
 Comcast  Dec.  22,  2005  Response  to  Information  Request  III.  K.  1.  at  28.  The  Commissions  questions  in  the  Comcast  Information  Request  regarding  terrestrial  delivery  were  directed  at  Comcast.  Time  Warner  therefore  did 


 not  file  any  information  with  the  Commission  regarding  terrestrial  delivery  of  programming.  468 
 Comcast  Dec.  22,  2005  Response  to  Information  Request  III.  K.  2.  at  28,  30-  32.  469 
 Id.  at  31.  Time  Warner  asserts  that  switching  from  terrestrial  to  satellite  delivery  imposes  additional  costs  to  the  cable  operator,  such  as  satellite  dishes,  down-  converters,  modulators,  etc.  Time  Warner  Apr.  8,  2006  Ex  Parte  at  7. 


 470  Comcast  cites  a  2000  program  access  order  for  the  proposition  that,  in  certain  circumstances,  a  networks 
 conversion  to  terrestrial  delivery  could  trigger  Commission  scrutiny.  Comcast  Mar.  15,  2006  Ex  Parte  at  8  &  n.  24  (citing  DIRECTV  v.  Comcast  Corp.,  15  FCC  Rcd  22802,  22807    13  (2000)).  [REDACTED]  See  Comcast  Jan.  13, 


 2006  Response  to  Information  Request  III.  J.  at  COM  IIIJ  000874  [REDACTED]  .  471 
 DIRECTV  Surreply  at  16-  17.  472 
 Id.  at  17-  18.  473 
 News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  543    147-  48. 
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 transactions  involve  no  material  vertical  effects.  474  The  Commission  found  that  the  News  Corp.  -Hughes  transaction  would  give  DIRECTV  the  incentive  and  ability  to  temporarily  withhold  access  to 
 RSN  programming,  because  such  withholding  would  provide  a  credible  means  of  raising  the  prices  charged  to  competing  cable  operators  for  RSN  programming.  475  The  Commission  therefore  conditioned 
 its  approval  of  the  transaction  on  compliance  with  a  series  of  safeguards  against  temporary  withholding  of  RSNs,  including  mandatory  arbitration  of  carriage  disputes.  476 


 138.  DIRECTV  has  submitted  an  analysis  of  the  profitability  of  temporary  foreclosure  based  on  the  economic  analysis  used  in  the  News  Corp.-  Hughes  Order.  477  DIRECTV  has  followed  the  general 
 principles  of  the  model  that  the  Commission  used  in  that  proceeding,  while  accounting  for  several  differences  in  the  manner  in  which  service  is  sold  to  consumers.  478  Given  these  assumptions,  DIRECTV 
 estimates  the  level  of  profits  (or  losses)  that  the  Applicants  would  earn  from  temporarily  foreclosing  DIRECTVs  access  to  particular  RSN  programming.  DIRECTV  finds  that  temporary  foreclosure  of 
 DIRECTVs  access  to  CSN  Mid-  Atlantic  and  CSN  West  would  be  profitable  prior  to  the  transactions.  479  It  also  indicates  that  temporary  foreclosure  would  become  more  profitable  following  the  transactions  in 
 the  CSN  Mid-  Atlantic  footprint.  DIRECTV  performs  a  similar  calculation  for  six  other  RSN  footprints  where  Comcasts  or  Time  Warners  share  of  cable  subscribers  following  the  transactions  would  be  at  least 
 40%.  480  DIRECTV  reports  that  temporary  foreclosure  could  be  profitable  following  the  transactions  in  these  areas  as  well.  481 


 139.  The  Applicants  criticize  DIRECTVs  analysis  on  the  grounds  that  the  transactions  should  be  analyzed  using  the  same  indicator  of  a  transaction-  specific  harm  due  to  temporary  foreclosure  as  that 
 used  in  the  News  Corp.-  Hughes  Order.  482  Pursuant  to  the  News  Corp.-  Hughes  analysis,  a  transaction-specific  harm  occurs  when  temporary  foreclosure  is  unprofitable  prior  to  that  transaction  and  becomes 
 profitable  due  to  the  transaction.  The  Applicants  point  out,  however,  that  for  the  RSNs  examined  by  DIRECTV,  the  point  at  which  temporary  foreclosure  becomes  profitable  for  Comcast  is  essentially 
 identical  both  prior  to  and  after  the  transactions.  483 
 140.  Discussion.  Based  on  the  record  and  our  own  independent  economic  analysis  in  the  Economic  Appendix,  we  conclude  that  the  transactions  will  increase  the  Applicants  incentive  and  ability 


 to  adopt  a  uniform  price  increase  strategy  for  RSN  programming  and  that  the  program  access  rules  will  not  likely  deter  such  conduct.  As  noted  above,  the  program  access  rules  do  not  prohibit  a  vertically 
 integrated  programmer  from  increasing  prices  charged  to  competing  MVPDs  if  the  price  increase  is  not 
 474  Applicants  Reply  at  44;  Comcast  Mar.  24,  2006  Ex  Parte  at  2-  3. 
 475  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  546-  47    159-  60. 
 476  Id.  at  552-  555    172-  79. 
 477  DIRECTV  Mar.  1,  2006  Ex  Parte  at  1.  DIRECTV  contends  that  temporary  foreclosure  is  more  profitable  after 
 the  transactions  in  the  CSN  Mid-  Atlantic  and  CSN  West  footprints.  Id.  at  3-  4.  478 
 See  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  App.  D,  644-  46    33-  38.  479 
 DIRECTV  does  not  analyze  the  situation  with  respect  to  other  Comcast  RSNs  because  either  data  is  not  available  or  DIRECTV  does  not  carry  the  RSN.  DIRECTV  Mar.  1,  2006  Ex  Parte  at  3. 


 480  The  networks  are  Altitude  Sports  and  Entertainment,  Fox  Sports  Florida,  Fox  Sports  Ohio,  Fox  Sports  Pittsburgh, 
 Fox  Sports  West,  and  Sun  Sports.  481 
 DIRECTV  Mar.  1,  2006  Ex  Parte  at  4,  Further  Statement  of  Bamberger  &  Neumann  at  12-  14,    25-  26.  DIRECTV  did  not  analyze  whether  temporary  foreclosure,  in  these  additional  markets,  would  be  profitable  before 


 the  transactions.  Id.  482 
 Comcast  Mar.  15,  2006  Ex  Parte,  Further  Ordover  &  Higgins  Decl.  at  6-  7.  483 
 Id.  at  4. 
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 discriminatory  or  if  the  programming  is  delivered  terrestrially.  Moreover,  we  find  that  a  uniform  price  increase  has  no  effect  on  the  actual  costs  borne  by  an  RSNs  affiliated  MVPD  because,  as  DIRECTV 
 states,  the  payment  goes  from  one  pocket  into  another.  484  Thus,  the  prospect  of  charging  itself  a  higher  rate  for  an  affiliated  RSN  would  not  deter  Comcast  or  Time  Warner  from  charging  a  uniformly  higher 
 rate  to  DBS  operators  or  other  competing  MVPDs.  Uniform  price  increases  will,  in  turn,  result  in  higher  cable  prices  and  fewer  alternatives  for  consumers.  485  Applicants  have  not  submitted  economic  data 
 analysis  or  similar  evidence  to  refute  commenters  claims.  486 
 141.  Based  on  our  review  and  analysis  of  the  record,  we  conclude  that  even  small  increases  in  Comcasts  and  Time  Warners  market  shares  may  increase  their  incentives  to  increase  the  price  of  their 


 RSNs  uniformly.  487  A  downstream  firm  that  wholly  owns  the  upstream  affiliate  has  an  incentive  to  raise  the  price  of  its  programming  for  both  itself  and  its  competitors  in  order  to  raise  rivals  costs.  488  In  the 
 MVPD  market,  a  vertically  integrated  cable  operator  will  likely  charge  the  highest  price  that  its  DBS  rivals  are  willing  to  pay  for  a  vertically-  integrated  RSN.  DBS  operators  willingness  to  pay  such  prices 
 increases  as  the  footprint  of  the  vertically  integrated  cable  operator  increases,  because  DBS  operators  know  that  if  they  fail  to  carry  the  RSN,  more  of  their  subscribers  will  switch  to  cable  to  gain  access  to 
 such  programming.  489 
 142.  As  explained  in  greater  detail  in  the  Economic  Appendix,  the  loss  in  subscribers  is  greatest  when  an  MVPD  does  not  carry  an  RSN  that  is  carried  by  competing  MVPDs.  490  In  that  situation, 


 an  MVPD  will  pay  more  for  an  RSN  than  it  would  if  its  competitors  did  not  carry  the  RSN.  Since  the  market  price  of  the  affiliated  RSN  has  no  impact  on  the  carriage  decision  of  an  affiliated  MVPD,  the  RSN 
 will  be  distributed  in  most,  if  not  all,  of  the  area  served  by  the  affiliated  MVPD.  As  the  footprint  of  the  affiliated  MVPD  in  the  relevant  geographic  market  covers  more  of  the  service  territory  of  a  competing 


 484  DIRECTV  Feb.  14,  2006  Ex  Parte  at  12.  The  Commission  is  generally  concerned  with  financial  relationships 
 between  the  Applicants  and  RSNs  that  have  the  effect  of  lowering  significantly  the  net  effective  rate  that  the  Applicants  pay  for  RSN  programming. 


 485  DIRECTV  Comments  at  30;  see  also  Letter  from  William  M.  Wiltshire,  Harris,  Wiltshire  &  Grannis,  LLP, 
 Counsel  for  DIRECTV,  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Feb.  16,  2006)  (  DIRECTV  Feb.  16,  2006  Ex  Parte),  Att.  1,  at  2  (explaining  that  DBS  penetration  is  lower  in  those  areas  in  which  DBS  is  denied  access  to  an 


 RSN,  that  this  reduces  the  ability  of  DBS  to  constrain  cable  pricing,  and  that  DBS  passes  programming  rate  increases  on  to  its  subscribers);  Letter  from  Stacy  R.  Fuller,  Vice  President,  Regulatory  Affairs,  DIRECTV,  Inc.,  to 
 Commissioner  Tate,  FCC  (Mar.  8,  2006)  (  DIRECTV  Mar.  8,  2006  Ex  Parte)  at  1  (explaining  that  Comcast  prices  for  the  expanded  basic  tier  in  Philadelphia  were,  on  average,  between  $3.  75  per  month  and  $7.  47  per  month  higher 
 than  expected)  and  at  2  (explaining  that  subscribers  will  be  saddled  with  programming  costs).  486 
 See  Letter  from  William  M.  Wiltshire,  Michael  D.  Nilsson,  S.  Roberts  Carter  III,  Harris,  Wiltshire  &  Grannis,  LLP,  Counsel  for  DIRECTV,  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  15,  2006)  (  DIRECTV  Mar.  15, 


 2006  Ex  Parte)  at  13,  14;  DIRECTV  Surreply  at  14-  17  (contending  that  Applicants  economic  exhibits  do  not  refute  DIRECTVs  arguments  concerning  uniform  price  increases).  DIRECTV  states  that  the  Ordover  &  Higgins 
 declaration  shows  only  that  there  are  no  significant  differences  in  the  fees  charged  to  MVPDs  that  compete  with  Comcast  as  compared  to  those  that  do  not  compete  with  Comcast.  DIRECTV  states  that  this  finding  does  not 
 undercut  DIRECTVs  contention  that  Comcast  engages  in  a  strategy  of  uniform  price  increases  by  allegedly  increasing  the  prices  for  CSN  Chicago  uniformly  to  all  MVPDs  and  by  raising  DBS  operators  costs  of  carrying 
 CSN  West  through  facially  neutral  pricing  that  achieves  discriminatory  effects.  DIRECTV  also  notes  that  the  declaration  does  not  describe  its  analysis  or  methodology.  DIRECTV  Surreply,  Lexecon  Report  at  18-  20. 


 487  See  Economic  Appendix,  App.  D,  Section  III,  Table  A-  2. 
 488  See  DIRECTV  Comments  at  19-  21;  DIRECTV  Surreply,  Lexecon  Report  at  12-  16. 
 489  See  Economic  Appendix,  App.  D,  Section  I. 
 490  Id.  at  Section  II. 
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 MVPD,  the  overall  willingness  to  pay  of  a  competing  MVPD  will  rise.  491  This  occurs  because,  unlike  unaffiliated  MVPDs  that  may  choose  not  to  carry  an  increasingly  expensive  RSN,  the  affiliated  MVPD 
 does  not  react  to  increases  in  the  price  of  the  RSN. 
 143.  We  estimate  the  willingness  to  pay  for  an  RSN  affiliated  with  one  of  the  Applicants  prior  to  the  transactions  and  estimate  the  percentage  change  in  this  price  following  the  transactions.  Since  the 


 transactions  at  issue  involve  a  large  number  of  system  swaps,  we  do  not  examine  the  impact  of  the  change  in  size  of  each  individual  Applicant.  Rather,  we  estimate  the  change  in  the  willingness  to  pay  based  on 
 the  change  in  the  size  of  the  largest  Applicant  serving  a  given  DMA.  In  its  simplest  form,  the  economic  model  predicts  that  the  percent  change  in  the  fee  of  the  affiliated  RSN  is  equal  to  the  percent  change  in 
 the  footprint  of  the  largest  Applicant.  492  Consistent  with  the  Horizontal  Merger  Guidelines,  we  consider  a  price  increase  to  be  significant  only  if  it  is  at  least  five  percent.  We  choose  this  threshold  not  only 
 because  it  is  consistent  with  the  Horizontal  Merger  Guidelines,  493  but  also  because  we  believe  that  price  increases  of  five  percent  or  more  would  likely  harm  rival  MVPDs  ability  to  compete  and/  or  be  passed  on 
 to  consumers  in  some  form,  such  as  increased  rates  or  reductions  in  quality  or  customer  service. 
 144.  We  first  evaluated  the  potential  for  a  uniform  price  increase  in  all  210  DMAs.  Under  this  initial,  simplest  form  of  the  model,  we  found  that  there  is  a  potential  for  an  increase  in  the  RSNs 


 affiliation  fee  of  at  least  five  percent  in  36  of  the  94  DMAs  affected  by  the  transactions.  494  As  indicated  in  our  discussion  of  the  relevant  geographic  market,  above,  we  then  refined  our  analysis  by  focusing  on 
 so-  called  key  DMAs.  Key  DMAs  are  those  DMAs  that  are  home  to  a  professional  sports  team  that  plays  in  one  of  the  following  leagues  Major  League  Baseball,  the  National  Basketball  Association,  the 
 National  Football  League,  or  the  National  Hockey  League.  These  DMAs  are  most  likely  to  be  within  the  inner  zone  of  an  RSN  where  the  sports  programming  is  most  popular  and  where  the  largest  shifts  in 
 subscribers  would  be  likely  to  occur  if  the  RSN  were  withheld.  We  find  a  potential  for  an  increase  in  the  RSNs  affiliation  fee  of  at  least  five  percent  in  15  of  the  39  key  DMAs.  These  DMAs  are  Atlanta, 
 Boston,  Buffalo,  Charlotte,  Cincinnati,  Cleveland,  Columbus,  Dallas,  Jacksonville,  495  Los  Angeles,  Miami,  Minneapolis,  Pittsburgh,  San  Diego,  and  Washington.  496  In  these  DMAs,  a  uniform  price  increase 
 is  likely  to  extract  at  least  an  additional  $4.2  million  per  market  in  RSN  fees  from  unaffiliated  MVPDs  under  conservative  assumptions  in  our  model.  497  In  the  aggregate,  over  $290  million  in  additional  fees 
 could  be  extracted  from  MVPDs  in  these  15  DMAs.  498  These  MVPDs  can  in  turn  be  expected  to  recoup  these  additional  fees  from  consumers  or  by  reducing  expenditures  for  marketing  or  other  activities. 


 145.  Impact  of  Lack  of  RSN  Access  on  a  Uniform  Price  Increase  Strategy.  One  of  the  factors  that  may  influence  the  size  of  a  uniform  price  increase  applied  to  RSN  programming  is  the  impact  on  a 
 competing  MVPD  of  not  having  access  to  that  RSN.  Lack  of  access  to  RSN  programming  can  decrease 
 491  Id.  at  App.  D,  Section  I,  equations  (2)  &  (3). 
 492  Id.  at  App.  D,  Section  I,  equation  (5). 
 493  Horizontal  Merger  Guidelines  at    1.1  (  In  attempting  to  determine  objectively  the  effect  of  a  small  but 
 significant  and  nontransitory  increase  in  price,  the  Agency,  in  most  contexts,  will  use  a  price  increase  of  five  percent  lasting  for  the  foreseeable  future.). 


 494  As  discussed  in  the  Economic  Appendix,  at  App.  D,  Section  III,  the  model  yields  similar  results  when  reasonable 
 alternative  assumptions  are  employed.  This  increases  our  confidence  that  our  conclusions  are  not  dependent  on  the  particular  set  of  assumptions  employed. 


 495  We  recognize  that  Jacksonville  currently  has  only  one  major  professional  sports  team,  whose  games  are  not 
 carried  on  an  RSN.  496 
 See  Economic  Appendix,  App.  D,  Section  III,  Table  A-  2.  497 
 Id.  498 
 Id. 
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 an  MVPDs  market  share  significantly.  The  Applicants  have  argued  that  DIRECTVs  and  EchoStars  lack  of  access  to  CSN  Philadelphia  has  not  had  a  significant  impact  on  DBS  market  share  in  Philadelphia 
 and  that  DIRECTVs  estimates  of  the  effect  are  fatally  flawed.  499  We  disagree. 
 146.  Evidence  supports  DIRECTVs  contention  that  DBS  penetration  levels  are  lower  when  DBS  providers  cannot  offer  the  local  RSN  to  their  subscribers  than  they  are  when  DBS  providers  carry 


 the  local  RSN,  as  demonstrated  by  our  analysis  of  DBS  market  share  in  all  210  Nielsen  DMAs  using  Nielsen  data  for  the  2004-  2005  television  season.  500  Our  analysis  indicates  that  DBS  penetration  in  81 
 DMAs  falls  below  the  DBS  nationwide  share  of  MVPD  households  calculated  by  Nielsen.  501  There  are  three  DMAs  where  the  games  of  some  of  the  local  professional  sports  teams  are  not  available  to  DBS 
 subscribers:  Charlotte,  Philadelphia,  and  San  Diego.  502  Only  four  out  of  210  DMAs  have  a  lower  DBS  market  share  than  San  Diego,  and  only  seven  out  of  210  DMAs  have  a  lower  market  share  than 
 Philadelphia.  The  market  share  in  San  Diego  is  9.5%,  which  is  59%  below  the  national  market  share.  The  market  share  in  Philadelphia  is  10.9%,  which  is  53%  below  the  national  figure.  503  Thus,  the 


 499  Applicants  Response  to  DIRECTV  Surreply  at  29-  32;  see  also  Letter  from  Michael  H.  Hammer,  Willkie  Farr  & 
 Gallagher  LLP,  Counsel  for  Adelphia  Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  9,  2006)  at  2-  3. 


 500  Internal  Comcast  documents  also  indicate  that  Comcast  understands  the  nexus  between  access  to  RSNs  and  DBS 
 penetration  levels.  See  Comcast  Jan.  13,  2006  Response  to  Information  Request  III.  J.  at  COM-  IIIJ-  000831  [REDACTED]  This  document  calculates  the  [REDACTED]  Id.  CSN  West  carries  the  Sacramento  Kings,  and 


 Comcast  ultimately  decided  [REDACTED]  Comcast  Jan.  13,  2006  Response  to  Information  Request  III.  J.  at  COM-  IIIJ-  000874.  The  document  reveals,  however,  that  Comcast  calculated  that  [REDACTED]  Comcast  Jan.  13, 
 2006  Response  to  Information  Request  III.  J.  at  COM-  IIIJ-  000831.  501 
 Nielsen  data  indicate  that  approximately  22.3%  of  households  subscribing  to  MVPD  service  received  service  from  DBS  providers  in  2005.  This  figure  differs  from  that  provided  in  the  Commissions  Twelfth  Annual  Video 


 Competition  Report  (27.72%).  See  Twelfth  Annual  Video  Competition  Report,  21  FCC  Rcd  at  2617-  18  App.  B,  Table  B-  1.  A  significant  reason  for  the  difference  is  that  the  Nielsen  data  measure  households  rather  than 
 subscribers  and  therefore  do  not  measure  seasonal  customers  and  commercial  accounts.  See  Letter  from  Arthur  H.  Harding,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Feb. 
 23,  2006)  (  Time  Warner  Feb.  23,  2006  Ex  Parte)  at  1. 
 502  The  RSN  in  New  Orleans  is  not  carried  by  either  DBS  operator,  though  it  is  offered  for  sale  to  DBS  operators. 
 DIRECTV  alleges  that  it  has  not  reached  an  agreement  with  Cox  Sports  New  Orleans  because  it  would  be  required  to  distribute  the  network  to  all  subscribers  within  350  miles  of  New  Orleans,  even  though  the  professional  basketball 


 games  that  comprise  the  most  valuable  content  on  the  RSN  cannot  be  shown  outside  a  75-  mile  radius  of  New  Orleans.  DIRECTV  Feb.  14,  2006  Ex  Parte  at  10. 


 503  Our  analysis  finds  that  the  DBS  market  share  in  Charlotte  is  25.  4%,  which  is  9%  above  the  national  average,  but 
 the  circumstances  in  Charlotte  appear  to  be  unique,  such  that  one  would  not  expect  Time  Warners  withholding  of  that  sports  programming  to  have  a  significant  impact  on  DBS  market  shares.  First,  in  a  full  third  of  the  DMA,  no 


 MVPD  distributed  the  network  that  was  carrying  the  games.  Second,  the  Charlotte  Bobcats  team,  the  sports  team  whose  games  are  carried  on  the  network  at  issue,  has  not  been  in  existence  long  enough  to  develop  a  fan  base  that 
 would  be  willing  to  switch  MVPDs  in  order  to  see  the  games,  having  played  its  first  games  in  2004.  National  Basketball  Association,  The  Wait  is  Finally  Over,  Nov.  4,  2004,  at 
 http://  www.  nba.  com/  bobcats/  preview_  washington_  041104.  html  (last  visited  June  20,  2006).  The  RSN,  C-  SET,  was  owned  by  the  Charlotte  Bobcats  and  has  ceased  operations.  The  Bobcats  games  continue  to  be  provided  to  cable 
 operators  on  an  exclusive  basis,  though  the  games  are  also  carried  over  the  air.  Currently  only  Time  Warner  and  Comporium  Cable  carry  Bobcats  games  on  cable.  See  Charlotte  Bobcats,  at 
 http://  www.  nba.  com/  bobcats/  Bobcats_  Broadcasting-  128276-  443.  html  (last  visited  June  20,  2006);  see  also  Charlotte  Bobcats,  Comporium  Cable  to  Air  Games  in  South  Carolina,  Nov.  4,  2005,  at 
 http://  www.  nba.  com/  bobcats/  release_  comporium_  051104.  html  (last  visited  June  20,  2006).  These  cable  operators  pass  approximately  66%  of  the  homes  in  the  Charlotte  DMA.  Warren  Communications  Cable  and  Television 
 Factbook  Online.  In  contrast,  Comcast  passes  approximately  79%  of  the  homes  in  Philadelphia,  [REDACTED]  (continued.) 
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 aggregate  market  shares  appear  to  indicate  that  DBS  providers  have  unusually  low  market  shares  in  markets  where  they  cannot  provide  local  sports  programming  to  their  subscribers. 
 147.  In  addition  to  comparing  DBS  market  shares  across  DMAs,  a  method  that  fails  to  consider  many  factors  that  may  influence  DBS  penetration  levels,  we  have  used  a  regression  analysis  to 
 estimate  the  effect  of  withholding  RSNs  on  DBS  operators  market  shares.  This  enables  us  to  examine  the  factors  that  influence  DBS  market  share  and  to  separate  out  the  effect  of  RSN  access  from  the  other 
 factors  that  could  affect  DBS  market  shares. 
 148.  There  are  two  studies  in  the  record  that  use  regression  analysis  to  estimate  the  impact  on  DBS  market  shares  when  the  local  RSN  is  not  available  to  DBS  operators.  Each  of  the  studies  uses  a 


 different  source  of  data  to  produce  similar  findings.  Using  information  on  the  number  of  DBS  subscribers  from  Media  Business  Corporation,  DIRECTV  finds  that  the  proportion  of  homes  subscribing  to  DBS  in 
 the  Philadelphia  DMA  is  51%  lower  than  it  would  be  if  the  RSN  were  made  available  to  DBS.  504  DIRECTV  reports  that  it  does  not  find  a  statistically  significant  effect  from  withholding  RSN  access  in 
 San  Diego.  505  EchoStar  has  also  submitted  a  regression  analysis,  conducted  in  2003,  using  its  internal  subscriber  counts.  EchoStars  analysis  indicates  that  EchoStars  penetration  in  the  Philadelphia  DMA  is 
 about  [REDACTED]  lower  than  it  would  be  if  it  had  access  to  CSN  Philadelphia.  506 
 149.  Our  own  regression  analysis  uses  data  from  the  Cable  Price  Survey,  as  well  as  Nielsens  data  regarding  the  number  of  households  that  subscribe  to  DBS.  507  We  find  that  the  percentage  of 


 television  households  that  subscribe  to  DBS  service  in  Philadelphia  is  40%  below  what  would  otherwise  be  expected  given  the  characteristics  of  the  market  and  the  cable  operators  in  the  DMA.  In  the  San  Diego 
 DMA,  lack  of  access  to  RSN  programming  is  estimated  to  cause  a  33%  reduction  in  the  households  subscribing  to  DBS  service.  508  The  analysis  does  not  show  a  statistically  significant  effect  on  predicted 
 market  share  caused  by  withholding  regional  sports  programming  in  Charlotte. 
 150.  Comcasts  own  documents  indicate  that  Comcast,  too,  recognizes  [REDACTED]  .  509  510  Thus,  Comcasts  own  documents  suggest  that  [REDACTED]  .  Although  Comcast  claims  this  document 


 does  not  represent  the  companys  official  position,  it  nevertheless  casts  doubt  on  Comcasts  claims  that  RSN  access  has  no  impact  on  DBS  penetration.  511 


 151.  We  conclude  that  there  is  substantial  evidence  that  a  large  number  of  consumers  will  refuse  to  purchase  DBS  service  if  the  provider  cannot  offer  an  RSN.  The  results  of  RSN  withholding  in 
 Charlotte  do  not  undermine  this  conclusion.  The  Charlotte  Bobcats  are  a  relatively  new  team  and  do  not  yet  have  a  strong  enough  following  to  induce  large  numbers  of  subscribers  to  switch  MVPDs.  There  is  no 
 evidence  to  suggest  that  the  popularity  of  RSNs  or  of  local  professional  sports  teams  will  decline  in  the  (Continued  from  previous  page) 
 See  Economic  Appendix,  App.  D,  Section  III,  Table  A-  2;  see  also  Comcast  Dec.  22,  2005  Response  to  Information  Request  III.  C.  at  III.  C1-  4.  xls. 
 504  DIRECTV  Surreply  at  App.  A,  6. 
 505  Id.  at  7. 
 506  Letter  from  Pantelis  Mialopoulus,  Counsel  for  EchoStar  Satellite  Corporation,  to  Marlene  H.  Dortch,  Secretary, 
 FCC,  at  4,  transmitted  by  letter  from  David  Goodfriend,  Director  of  Business  Development,  EchoStar  Satellite  L.  L.  C.  to  Marlene  H.  Dortch  (Jan.  25,  2006). 


 507  See  Economic  Appendix,  App.  D,  Section  II. 
 508  This  result  is  statistically  significant  at  the  95%  level  of  confidence,  in  contrast  to  the  result  calculated  by 
 DIRECTV  for  San  Diego.  509 
 Comcast  Jan.  13,  2006  Response  to  Information  Request  III.  J.  at  COM-  IIIJ-  000965  [REDACTED]  .  510 
 Id.  [REDACTED]  511 
 Comcast  Mar.  27,  2006  Ex  Parte  at  1  n.  2. 
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 future  and  every  indication  that  access  to  RSNs  will  continue  to  be  an  important  determinant  of  market  share.  The  circumstances  that  create  an  incentive  to  engage  in  a  uniform  price  increase  are  likely  to  exist 
 with  respect  to  most  RSNs.  Because  the  failure  to  carry  an  RSN  can  have  a  significant  impact  on  the  profitability  of  an  MVPD  facing  direct  competition,  competing  MVPDs  will  be  willing  to  pay  a  high  price 
 in  order  to  ensure  that  they  obtain  RSN  programming. 
 152.  Other  Influences  on  the  Profitability  of  Uniform  Price  Increase  Strategy.  The  record  demonstrates  that  the  Applicants  have  established  joint  ventures  that  have  enhanced  their  ability  to 


 impose  uniform  price  increases.  In  particular,  Comcast  and  Time  Warner  share  ownership  of  SportsNet  New  York,  and  Comcast  and  Charter  share  ownership  of  Comcast/  Charter  Sports  Southeast.  512  One 
 potential  risk  of  raising  an  affiliated  RSNs  price  is  that  non-  competing  cable  operators  in  the  RSNs  footprint  may  decline  to  purchase  the  network.  In  several  instances,  however,  Applicants  have  shared 
 ownership  in  the  RSN  with  other  local,  non-  rival  cable  operators.  513  Forming  joint  ventures  with  non-competing  cable  operators  immunizes  the  vertically  integrated  cable  operator  from  a  uniform  price 
 increases  impact,  because  the  higher  price  the  non-  competing  cable  operator  pays  is  offset  by  the  higher  returns  gained  from  its  share  of  the  RSNs  profits.  Indeed,  if  the  RSN  ownership  shares  match  each  cable 
 operators  share  of  the  total  subscribers  that  receive  the  RSNs  programming,  then  a  uniform  price  increase  will  have  no  impact  on  each  cable  operators  profits.  514  The  formation  of  joint  ventures  with 
 non-  competing  cable  operators,  therefore,  significantly  increases  the  likelihood  that  these  other  cable  operators  will  purchase  the  RSN  programming  regardless  of  price.  515  For  example,  Applicants  internal 
 documents  indicate  [REDACTED]  516  .  This  evidence  suggests  that  MVPDs  can  use  a  joint  venture  as  a  vehicle  by  which  to  implement  a  uniform  price  increase  strategy. 


 153.  We  agree  with  DIRECTV  that  Applicants  use  of  net  effective  rate  provisions  also  establishes  a  means  by  which  Comcast  and  Time  Warner  can  absorb  a  uniform  price  increase  while 
 raising  the  costs  of  programming  to  their  MVPD  rivals.  517  For  example,  under  the  agreement  establishing  the  joint  venture  that  owns  SportsNet  New  York,  Comcast  and  Time  Warner  have  the  right  to 
 [REDACTED]  518  [REDACTED]  519  These  provisions  are  consistent  with,  and  eliminate  the  cost  to 


 512  Comcast  Dec.  22,  2005  Response  to  Information  Request  III.  A.  1.  at  16;  see  also  CSS  Southeast,  at 
 http://  www.  csssports.  com/  about_  us.  cfm  (last  visited  June  20,  2006).  513 
 Comcast  Dec.  22,  2005  Response  to  Information  Request  III.  A.  1.  at  16;  Comcast  Jan.  13,  2006  Response  to  Information  Request  III.  J.  at  COM  IIIJ-  000943,  -000970  (Regional  Sports  Research);  Time  Warner  Mar.  2,  2006 


 Response  to  Information  Request  III.  J.  at  TWFCCM  0061  (Second  Amended  and  Restated  Limited  Liability  Company  Agreement  of  Sterling  Entertainment  Enterprises,  LLC). 
 514  For  example,  if  an  RSN  has  1  million  subscribers  and  a  cable  operator  has  25%  (=  250,  000  subscribers)  of  those 
 subscribers  and  a  25%  equity  stake  in  the  RSN,  then  a  $1  increase  in  the  RSNs  affiliate  fee  means  that  the  cable  operator  will  pay  $250,  000  more  for  its  250,000  subscribers.  The  RSNs  profits  will  increase  by  $1  million, 


 however,  and  thus  the  cable  operator  will  receive  $250,000  back  as  its  share  of  the  profits.  Therefore  the  price  increase  has  not  affected  the  cable  operators  effective  cost  for  RSN  service.  The  cable  operators  equity  stake  then 
 perfectly  insulates  it  from  price  increases  in  the  RSN  affiliate  fee.  MVPDs  with  no  equity  stake  in  the  RSN,  on  the  other  hand,  will  find  their  effective  cost  rising  by  $1  per  subscriber. 


 515  [REDACTED]  Comcast  Jan.  13,  2006  Response  to  Information  Request  III.  J  at  COM  IIIJ-  000867 
 [REDACTED]  .  516 
 [REDACTED]  Comcast  Dec.  22,  2005  Response  to  Information  Request  III.  A.  I.  at  16  n.  3.  One  Comcast  document  states  that  [REDACTED]  Comcast  Jan  13,  2006  Response  to  Information  Request  at  III.  J.  at  COM-  III.  J-000967. 


 [REDACTED]  517 
 See  DIRECTV  Feb.  14,  2006  Ex  Parte  at  12-  13.  518 
 Time  Warner  Mar.  2,  2006  Response  to  Information  Request  III.  J.  at  TW  FCCM  0086-  89  (Second  Amended  and  Restated  Limited  Liability  Company  Agreement  of  Sterling  Entertainment  Enterprises). 
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 cable  operators  of,  a  potential  strategy  of  engaging  in  a  uniform  price  increase  because  Comcast  and  Time  Warner  can  incorporate  the  share  of  profits  their  programming  divisions  stand  to  receive  from  affiliated 
 RSNs  when  evaluating  the  rate  their  cable  divisions  should  pay  for  such  programming.  520  As  DIRECTV  explains  regarding  the  use  of  such  a  provision  [REDACTED]  .  521 


 154.  We  are  not  persuaded  by  Time  Warners  contention  that  a  joint  venture  structure  mitigates  the  likelihood  that  it  could  use  the  net  effective  rate  provision  in  the  SportsNet  New  York 
 agreement  to  impose  a  uniform  price  increase  strategy.  522  Though  an  MVPD  may  have  only  partial  RSN  ownership,  the  costs  it  incurs  as  the  result  of  a  uniform  price  increase  for  that  programming  are 
 nonetheless  lower  than  the  costs  an  unaffiliated  MVPD  would  incur,  because  even  partial  ownership  entitles  an  owner  to  a  share  of  profits  from  advertising  and  other  sources,  as  well  as  from  the  increased 
 programming  fees.  523 
 155.  Conditions.  Our  analysis  demonstrates  that  the  transactions  are  likely  to  result  in  a  public  interest  harm  based  on  the  ability  of  Applicants  to  impose  uniform  price  increases  on  carriage  of  RSN 


 programming.  This  could  not  only  harm  consumers  of  existing  MVPDs  but  also  could  hamper  entry  by  new  MVPD  competitors,  thereby  denying  consumers  the  significant  benefits  of  emerging  MVPD 
 competition.  Because  the  program  access  rules  do  not  afford  a  remedy  for  allegations  of  competitive  harm  due  to  uniform  price  increases,  we  determine  that  conditions  are  necessary  to  mitigate  the  foregoing 
 potential  harms.  524 


 (Continued  from  previous  page)  519  [REDACTED]  Time  Warner  Mar.  2,  2006  Response  to  Information  Request  III.  J.  at  TW  FCCM  0086-  89 
 [REDACTED]  ;  see  also  DIRECTV  Feb.  14,  2006  Ex  Parte  at  12-  13.  520 
 Letter  from  William  M.  Wiltshire,  Michael  D.  Nilsson,  S.  Roberts  Carter  III,  Harris,  Wiltshire  &  Grannis,  LLP,  Counsel  for  DIRECTV,  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  27,  2007)  (  DIRECTV  Mar.  27,  2006  Ex 


 Parte)  at  6,  7  (citing  TW  FCC2  00000005  [REDACTED]  .  The  Time  Warner  document  to  which  DIRECTV  cites  states  that  [REDACTED]  Time  Warner  Mar.  14,  2006  Response  to  Information  Request  III.  J.  at  TW  FCC2 
 00000005.  521 
 DIRECTV  Mar.  15,  2006  Ex  Parte  at  3.  522 
 Time  Warner  contends  that  the  provision  does  not  make  Comcast  or  Time  Warner  effectively  immune  from  a  uniform  price  increase.  Time  Warner  states  that  it  would  be  economically  irrational  for  it  to  impose  a  uniform  price 


 increase  for  SportsNet  New  York  since  it  owns  only  22%  of  the  joint  venture,  alleging  that  such  a  strategy  would  increase  its  programming  costs  by  $1.  00  in  return  for  22  of  profit.  Time  Warner  March  2,  2006  Ex  Parte  at  5-  6. 
 According  to  Time  Warner,  the  net  effective  rate  provision  in  the  SportsNet  New  York  agreement  merely  provides  an  exit  mechanism  from  the  joint  venture.  Id.  Although  Time  Warner  states  that  it  owns  22%  of  SportsNet  New 
 York,  Comcasts  December  submission  shows  that  Time  Warner  owns  26.833%  of  the  joint  venture.  Comcast  Dec.  22,  2005  Response  to  Information  Request  III.  A.  1.  at  16;  see  also  Time  Warner  Mar.  2,  2006  Ex  Parte  at  6. 


 523  See  DIRECTV  Mar.  15,  2006  Ex  Parte  at  4.  DIRECTV  explains  that  a  uniform  $1.  00  price  increase  raises  rivals 
 costs  by  $1.  00  per  subscriber,  but  Time  Warners  costs  increase  by  only  about  [REDACTED]  per  subscriber  because  [REDACTED]  per  subscriber  is  effectively  an  internal  transfer  from  Time  Warner  to  Time  Warner. 


 DIRECTV  contends  that  as  a  result,  Time  Warner  gains  a  cost  advantage  over  its  rivals  of  [REDACTED]  per  subscriber.  Id.;  see  also  supra  para.  152-  53.  One  of  Time  Warners  documents  [REDACTED]  Time  Warner  Jan. 
 6,  2006  Response  to  Information  Request  III.  J.  at  eTW  00001897  [REDACTED]  .  524 
 As  discussed  above,  our  licensing  authority  under  Section  310(  d)  of  the  Communications  Act  enables  us  to  impose  conditions  to  our  approval  to  ensure  that  the  public  interest  is  served  by  a  transaction.  See  supra  para.  26;  47 


 U.  S.  C.    310(  d);  WorldCom-  MCI  Order,  13  FCC  Rcd  at  18025,  18031-  32    1,  10  (conditioning  approval  on  the  divestiture  of  MCIs  Internet  assets);  Deutsche  Telekom-  VoiceStream  Wireless  Order,  16  FCC  Rcd  at  9821    1 
 (conditioning  approval  on  compliance  with  agreements  with  Department  of  Justice  and  Federal  Bureau  of  Investigation  addressing  national  security,  law  enforcement,  and  public  safety  concerns).  Section  303(  r)  of  the 
 Communications  Act  authorizes  the  Commission  to  prescribe  such  restrictions  or  conditions,  not  inconsistent  with  law,  that  may  be  necessary  to  carry  out  the  provisions  of  the  Act.  47  U.  S.  C.    303(  r).  See  WorldCom-  MCI  Order, 
 13  FCC  Rcd  at  18032    10  n.  36  (citing  FCC  v.  Natl  Citizens  Comm.  for  Broadcasting,  436  U.  S.  775  (1978)  (continued.) 
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 156.  To  mitigate  potential  harms  from  uniform  price  increases,  as  well  as  other  strategies  discussed  below,  we  impose  a  remedy  based  on  commercial  arbitration  such  as  that  imposed  in  the  News 
 Corp.-  Hughes  Order.  The  arbitration  remedy,  as  set  forth  in  Appendix  B,  will  constrain  Comcasts  and  Time  Warners  ability  to  increase  rates  for  RSN  programming  uniformly  or  otherwise  disadvantage  rival 
 MVPDs  via  anticompetitive  strategies.  Likewise,  as  we  did  in  the  News  Corp.-  Hughes  Order,  we  also  condition  our  approval  on  a  requirement  that  Comcast,  Time  Warner,  and  their  covered  RSNs,  regardless 
 of  the  means  of  delivery,  refrain  from  engaging  in  specific  unfair  practices  proscribed  by  the  Commissions  program  access  rules.  525  Specifically,  we  prohibit  Comcast,  Time  Warner,  and  their 
 existing  or  future  covered  RSNs,  regardless  of  the  means  of  delivery,  from  offering  any  such  RSN  on  an  exclusive  basis  to  any  MVPD,  and  we  prohibit  Comcast  and  Time  Warner  from  entering  into  an  exclusive 
 distribution  arrangement  with  any  such  RSN,  regardless  of  the  means  of  delivery.  526  In  addition,  we  require  that  Comcast,  Time  Warner,  and  their  covered  RSNs,  regardless  of  the  means  of  delivery,  make 
 such  RSNs  available  to  all  MVPDs  on  a  non-  exclusive  basis  and  on  nondiscriminatory  terms  and  conditions.  We  also  prohibit  Comcast  and  Time  Warner  (including  any  entity  with  which  it  is  affiliated) 
 from  unduly  or  improperly  influencing  (i)  the  decision  of  any  covered  RSN,  regardless  of  the  means  of  delivery,  to  sell  programming  to  an  unaffiliated  MVPD;  or  (ii)  the  prices,  terms,  and  conditions  of  sale  of 
 programming  by  a  covered  RSN,  regardless  of  the  means  of  delivery,  to  an  unaffiliated  MVPD.  For  enforcement  purposes,  aggrieved  MVPDs  may  bring  program  access  complaints  against  Comcast  and 
 Time  Warner  or  their  covered  RSNs  using  the  procedures  set  forth  in  the  Commissions  program  access  rules.  527 


 157.  We  adopt  this  condition  to  ensure  that  the  exclusive  contracts  and  practices,  non-discrimination,  and  undue  or  improper  influence  requirements  of  the  program  access  rules  will  apply  to 
 Comcast,  Time  Warner,  and  their  covered  RSNs,  regardless  of  the  means  of  program  delivery.  As  in  the  News  Corp.-  Hughes  Order,  this  program  access  condition  will  apply  to  Comcast,  Time  Warner,  and  their 
 covered  RSNs  for  six  years,  provided  that  if  the  program  access  rules  are  modified  this  condition  shall  be  modified  to  conform  to  any  revised  rules  adopted  by  the  Commission.  528  Comcasts  and  Time  Warners 


 (Continued  from  previous  page)  (upholding  broadcast-  newspaper  cross-  ownership  rules  adopted  pursuant  to  section  303(  r);  U.  S.  v.  Southwestern 
 Cable  Co.,  392  U.  S.  157,  178  (1968)  (section  303(  r)  powers  permit  Commission  to  order  cable  company  not  to  carry  broadcast  signal  beyond  stations  primary  market);  United  Video,  Inc.  v.  FCC,  890  F.  2d  1173,  1182-  83  (D.  C.  Cir. 
 1989)  (syndicated  exclusivity  rules  adopted  pursuant  to  section  303(  r)  authority)).  525 
 See  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  532    127  &  App.  F;  47  C.  F.  R.    76.  1002.  These  rules  already  apply  to  Comcasts  and  Time  Warners  affiliated  satellite-  delivered  programming.  Our  condition  extends  the 


 prohibitions  set  forth  in  the  rules,  as  well  as  the  complaint  procedures,  to  any  terrestrially  delivered  RSNs  in  which  Comcast  or  Time  Warner  have  or  may  acquire  an  attributable  interest.  The  condition  is  not  intended  to  affect  the 
 application  of  the  program  access  rules  to  Comcasts  and  Time  Warners  satellite-  delivered  networks,  which  will  continue  to  be  subject  to  the  program  access  rules  even  after  these  conditions  expire.  The  arbitration  and  program 
 access  conditions  apply  to  any  RSN,  regardless  of  the  means  of  delivery,  that  is  currently  managed  or  controlled  by  Comcast  or  Time  Warner  and  prohibit  Comcast  or  Time  Warner,  on  a  going  forward  basis,  from  acquiring  a 
 managing,  controlling,  or  otherwise  attributable  interest  in  any  RSN,  regardless  of  the  means  of  delivery,  that  is  not  contractually  obligated  to  abide  by  these  conditions.  For  the  reasons  explained  below,  however,  the  conditions  we 
 adopt  here  apply  partially  to  Comcast  SportsNet  Philadelphia.  A  Covered  RSN  is  an  RSN  (i)  that  Comcast  or  Time  Warner  currently  manages  or  controls,  or  (ii)  in  which  Comcast  or  Time  Warner,  on  or  after  the  date  of 
 adoption  of  this  Order  and  during  the  period  of  the  conditions,  acquires  either  an  attributable  interest,  an  option  to  purchase  an  attributable  interest,  or  one  that  would  permit  management  or  control  of  the  RSN. 


 526  This  condition  is  intended  to  prohibit  all  exclusive  arrangements,  including  those  that  may  not  be  effectuated  by  a 
 formal  agreement.  527 
 47  C.  F.  R.    76.1003.  528 
 See  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  532-  33    128  &  App.  F.  Although  most  of  the  program  access  rules  have  no  sunset  date,  Section  76.  1002(  c),  the  prohibition  on  exclusive  contracts,  sunsets  on  October  5,  2007, 


 unless  the  Commission  finds  that  the  prohibition  continues  to  be  necessary  to  protect  competition  in  the  distribution  (continued.) 
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 satellite-  delivered  networks  will  continue  to  be  subject  to  the  program  access  rules  even  after  the  conditions  imposed  herein  expire. 
 158.  For  purposes  of  the  foregoing  conditions  the  term  RSN  means  any  non-  broadcast  video  programming  service  that  (1)  provides  live  or  same-  day  distribution  within  a  limited  geographic  region  of 
 sporting  events  of  a  sports  team  that  is  a  member  of  Major  League  Baseball,  the  National  Basketball  Association,  the  National  Football  League,  the  National  Hockey  League,  NASCAR,  NCAA  Division  I 
 Football,  NCAA  Division  I  Basketball  and  (2)  in  any  year,  carries  a  minimum  of  either  100  hours  of  programming  that  meets  the  criteria  of  subheading  1,  or  10%  of  the  regular  season  games  of  at  least 
 one  sports  team  that  meets  the  criteria  of  subheading  1.  529  The  100-  hour  programming  minimum  is  based  on  the  minimum  amount  of  regional  sports  programming  that  commenters  contended  could  harm 
 competitors  if  it  were  withheld  from  them.  530  We  note  that  for  some  sports  in  which  relatively  few  games  are  played  during  the  regular  season,  however,  that  criterion  would  allow  a  network  to  carry  an  entire 
 season  of  a  teams  games  without  being  considered  an  RSN.  We  therefore  added  a  percentage  of  programming  figure  in  our  definition  as  an  alternative  method  of  measuring  the  programming  time 
 required  to  fit  the  definition  of  RSN.  In  assessing  which  percentage  to  use,  we  noted  that  there  are  examples  of  regions  with  five  or  more  teams  of  the  type  described  in  subheading  1  with  significant 
 regional  interest,  and  a  programming  threshold  of  20%  would  enable  a  network  to  carry  a  full  season  of  sporting  events  by  combining  the  games  of  such  teams,  without  being  considered  an  RSN.  On  the  other 
 hand,  setting  the  threshold  too  low  might  prevent  a  network  from  carrying  even  a  single  game  of  significant  local  interest.  Therefore  we  have  selected  10%  as  our  alternative  threshold  measure.  531 


 159.  As  discussed  above,  we  find  that  the  Applicants  will  have  an  incentive  to  increase  the  price  of  affiliated  RSNs  in  a  number  of  markets  as  a  result  of  the  transactions.  Our  analysis  described 
 above  highlights  the  transaction-  specific  incentives  for  Comcast  and  Time  Warner  to  impose  uniform  price  increases  in  15  DMAs,  but,  in  fashioning  a  remedy  for  potential  pricing  harms,  we  cannot  view  the 
 15  DMAs  in  isolation  from  other  markets  in  which  the  applicants  own  RSNs.  Because  arbitration  outcomes  may  be  affected  by  the  general  price  level  and  price  trends  for  RSNs,  the  imposition  of  an 
 arbitration  condition  for  only  some  of  the  Applicants  affiliated  RSNs  could  give  Applicants  the  incentive  to  increase  the  prices  of  affiliated  RSNs  not  subject  to  the  condition.  In  this  way,  the  Applicants  could 
 defeat  the  remedial  effects  of  an  arbitration  condition  were  it  limited  only  to  a  subset  of  markets. 
 160.  While  the  conditions  are  intended  to  remedy  the  potential  harms  from  uniform  price  increases,  these  conditions  will  also  provide  protection,  if  necessary,  against  stealth  discrimination, 


 (Continued  from  previous  page)  of  video  programming.  See  47  C.  F.  R.    76.  1002(  c)(  2);  supra  para.  41.  In  the  year  prior  to  the  sunset,  the 
 Commission  will  conduct  a  proceeding  to  evaluate  the  circumstances  in  the  video  programming  marketplace.  529 
 This  definition  of  RSN  does  not  include  TBS,  TNT,  or  OLN  programming  networks,  because  those  networks  are  distributed  nationally,  as  opposed  to  within  a  limited  geographic  region.  This  definition  of  RSN  is  not  meant  to 


 exclude  local  origination  channels.  530 
 For  example,  DIRECTV  claims  that  it  wanted  to  carry  CSN  West,  a  Comcast  RSN  that  carried  Sacramento  Kings  NBA  games.  See  supra  paras.  132-  33.  [REDACTED]  Comcast  Dec.  22,  2005  Response  to  Information 


 Request  III.  A.  at  III.  A.  5.xls.  [REDACTED]  531 
 This  threshold  is  sufficiently  low  to  address  commenters  concerns  that  Comcast  or  Time  Warner  would  spread  their  regional  sports  programming  over  multiple  video  programming  services  to  avoid  triggering  the  conditions.  See 


 Letter  from  Stanton  Dodge,  Senior  Vice  President,  EchoStar  Satellite,  Andrew  Schwartzman,  President,  Media  Access  Project,  Richard  Ramlall,  Senior  Vice  President,  RCN  Corporation,  Jonathan  Rintels,  President,  Center  for 
 Creative  Voices  in  Media,  Doron  Gorshein,  CEO,  The  America  Channel,  to  Marlene  H.  Dortch,  Secretary,  FCC  (July  6,  2006)  at  2. 
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 permanent  foreclosure,  and  temporary  foreclosure.  532  Thus,  we  need  not  determine  the  degree  to  which  the  transactions  increase  the  profitability  of  any  of  these  strategies. 
 161.  The  arbitration  and  program  access  conditions  apply  in  two  situations.  First,  they  apply  to  RSNs  currently  managed  or  controlled  by  Comcast  or  Time  Warner.  These  are  the  RSNs  that  Comcast 
 or  Time  Warner  can  ensure  abide  by  the  conditions.  Second,  the  conditions,  on  a  going-  forward  basis,  forbid  the  Applicants  from  acquiring  an  attributable  interest  in,  an  option  to  purchase  an  attributable 
 interest  in,  or  one  that  would  permit  management  or  control  of  an  RSN  during  the  period  of  the  conditions  set  forth  in  Appendix  B  if  the  RSN  is  not  obligated  to  abide  by  the  conditions.  533  This  approach  is 
 intended  to  prevent  the  development  of  contractual  provisions  that  could  circumvent  the  conditions  and  will  ensure  that  Comcast  and  Time  Warner  take  the  conditions  into  account  when  structuring  or 
 restructuring  investments  in  the  future,  such  that  a  new  or  restructured  financial  interest  is  accompanied  by  a  contractual  obligation  by  the  RSN  to  abide  by  the  conditions. 


 162.  We  conclude  that  technological  change  may  alter  the  economics  of  the  various  delivery  modes.  Further,  we  note  that  Comcast  already  operates  regional  terrestrial  distribution  networks  in 
 [REDACTED]  locations.  534  Should  Comcast  or  Time  Warner  later  determine  that  terrestrial  delivery  is  the  most  cost-  effective  means  of  distributing  their  existing  RSNs  or  RSNs  they  may  acquire  or  develop, 
 the  Commissions  program  access  rules  would  not  prevent  either  firm  from  withholding  such  programming  from  their  rivals  or  from  imposing  discriminatory  pricing.  Accordingly,  we  apply  the 
 arbitration  condition  and  the  prohibition  on  exclusive  contracts  or  other  behaviors  proscribed  by  the  program  access  rules  described  herein  regardless  of  the  means  of  delivery  to  protect  against  public 
 interest  harms.  We  note  that  Comcast  alleges  that  terrestrial  delivery  is  not  economical.  535  If  it  becomes  economical  because  of  the  possibility  of  permanent  withholding,  our  conditions  will  ensure  that  such 
 anticompetitive  behavior  does  not  result.  Comcast  and  Time  Warner  will  be  able  to  factor  our  conditions  into  their  decision  whether  to  invest  in  terrestrial  delivery,  and  our  conditions  will  ensure  that  the 
 economics  are  not  influenced  by  the  possibility  of  anticompetitive  behavior. 
 163.  We  accept,  however,  Applicants  explanation  that  Philadelphia  is  a  unique  case.  536  The  method  of  delivery  in  Philadelphia  was  not  chosen  for  the  purposes  of  enabling  anticompetitive  behavior. 


 Rather,  the  programming  was  delivered  terrestrially  before  the  network  was  acquired  by  Comcast.  Accordingly,  though  we  apply  the  conditions  discussed  above  to  covered  RSNs  regardless  of  delivery 
 mode,  we  do  not  require  that  Comcast  SportsNet  Philadelphia  be  subject  to  those  conditions  to  the  extent  it  is  not  currently  available  to  MVPDs.  With  regard  to  MVPDs  that  currently  have  contracts  for 
 SportsNet  Philadelphia,  both  the  program  access  and  arbitration  conditions  will  apply  as  set  forth  above. 


 532  The  application  of  the  program  access  conditions  to  terrestrial  networks  will  ensure  that  those  networks  are 
 available  to  competing  MVPDs.  The  arbitration  condition  will  ensure  that  disputes  that  may  arise  because  of  alleged  discrimination  or  temporary  foreclosure  can  be  resolved  expeditiously  via  arbitration.  The  condition  will 


 further  ensure  that  programming  an  MVPD  carries  prior  to  arbitration  is  not  temporarily  disrupted  during  arbitration.  533 
 Thus,  on  a  going  forward  basis,  these  conditions  are  triggered  by  the  acquisition  of  an  attributable  interest  even  if  the  interest  is  not  controlling  and  does  not  include  management  rights.  See  infra  App.  B. 


 534  See  Comcast  Dec.  22,  2005  Response  to  Information  Request  III.  K.  at  28-  30.  Comcasts  regional  terrestrial 
 networks  are  located  in  [REDACTED]  .  Id.  These  terrestrial  networks  are  not  programming  networks,  but  fiber  infrastructure.  According  to  Comcast,  its  terrestrial  networks  currently  carry  a  variety  of  digital  and  advanced 


 services,  including  VOD  programming,  high  definition  programming  (including,  in  certain  cases,  the  high  definition  feeds  of  Comcast's  regional  sports  networks),  all  digital  simulcast  programming,  local  broadcast  programming, 
 advertising  (transported  to  local  systems  ad  servers),  Comcast  Digital  Voice  services,  and  high-  speed  data.  Id.  at  30. 


 535  Id.  at  31. 
 536  Id.  at  28. 
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 164.  As  we  concluded  in  the  News  Corp.-  Hughes  proceeding,  the  markets  and  technologies  used  in  the  provision  of  MVPD  services  and  video  programming  continue  to  evolve  over  time,  rendering 
 accurate  predictions  of  future  competitive  conditions  difficult.  537  Accordingly,  as  in  News  Corp.-  Hughes,  the  arbitration  condition  shall  remain  in  effect  for  six  years  from  the  adoption  date  of  this  Order.  538  The 
 Commission  will  consider  a  petition  for  modification  of  this  condition  if  it  can  be  demonstrated  that  there  has  been  a  material  change  in  circumstance  or  the  condition  has  proven  unduly  burdensome,  rendering  the 
 condition  no  longer  necessary  in  the  public  interest. 
 165.  Six  months  prior  to  the  expiration  of  the  conditions,  the  Commission  shall  issue  a  report  on  regional  sports  network  access  and  carriage  issues  both  on  an  industry-  wide  basis  and  specifically  with 


 respect  to  the  Applicants.  After  issuing  the  report,  the  Commission,  in  its  discretion,  may  determine  if  further  action  is  warranted.  Moreover,  the  Commission  intends  to  review,  evaluate  and  improve  the 
 effectiveness  of  the  complaint  resolution  procedures  prescribed  in  Sections  76.1003  and  76.1302  of  our  rules.  539 


 b.  National  and  Non-  Sports  Regional  Programming 
 166.  Positions  of  the  Parties.  EchoStar  and  RCN  assert  that  the  proposed  transactions  would  give  Time  Warner  and  Comcast  an  enhanced  incentive  and  ability  to  withhold  national  and  non-  sports 


 regional  programming.  540  According  to  EchoStar,  Comcasts  expanded  share  of  the  national  MVPD  market  would  result  in  an  increased  incentive  and  ability  to  engage  in  vertical  foreclosure  strategies.  541 
 RCN  contends  that  its  difficulties  in  obtaining  PBS  Kids  and  PBS  Sprout  VOD  programming,  programming  that  is  developed  by  a  joint  venture  controlled  by  Comcast,  shows  Comcasts  desire  to  use 
 the  bargaining  power  of  must  have  PBS  Kids  and  PBS  Sprout  VOD  programming  content  as  leverage  to  impose  onerous  terms  on  RCN.  542  RCN  contends  that  PBS  Kids  and  PBS  Sprout  VOD  qualify  as 


 537  See  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  555    179. 
 538  Id. 
 539  47  C.  F.  R.    76.  1003,  76.  1302. 
 540  EchoStar  Comments  at  8,  13;  RCN  Comments  at  12-  13  (describing  failed  efforts  to  arrange  carriage  of  PBS  Kids 
 VOD  programming  after  Comcast  entered  into  a  joint  venture  with  PBS  to  produce  the  Sprout  network  and  claiming  that  Sprout  is  must-  have  programming  for  viewers  with  young  children).  Letter  from  Jean  L.  Kiddoo,  Bingham 


 McCutchen  LLP,  to  Marlene  H.  Dortch,  Secretary,  FCC  (July  6,  2006)  (describing  film  libraries  as  must  have  programming  for  VOD);  RCN  Mar.  3,  2006  Ex  Parte  at  4  (contending  that  Comcast  and  Time  Warner  plan  to 
 acquire  rights  to  the  film  libraries  of  the  largest  movie  studios).  EchoStar  further  notes  that  Time  Warner  controls  a  library  of  very  popular  national  and  regional  non-  sports  programming,  such  as  CNN  and  HBO.  EchoStar  contends 
 that  Time  Warners  acquisition  of  the  Adelphia  systems,  and  the  prospect  of  luring  subscribers  away  from  DBS,  could  tip  the  scales  in  favor  of  a  foreclosure  strategy.  EchoStar  Comments  at  8. 
 541  EchoStar  Comments  at  9-  10.  EchoStar  asserts  that  Comcast  and  Time  Warner  already  have  engaged  in 
 anticompetitive  tactics  that  have  prevented  it  from  offering  certain  programming  to  subscribers  by  imposing  contract  terms  that  disadvantage  DBS  operators.  For  example,  EchoStar  contends  that  Comcasts  Outdoor  Life  Network, 


 which  carries  the  games  of  the  National  Hockey  League,  requires  MVPDs  to  include  the  programming  on  a  tier  that  is  purchased  by  at  least  40%  of  the  MVPDs  subscribers.  See  Letter  from  David  K.  Moskowitz,  EchoStar,  to 
 Marlene  H.  Dortch,  Secretary,  FCC  (  EchoStar  Dec.  23,  2005  Ex  Parte)  at  5-  6.  The  tier  on  which  EchoStar  carries  the  network  does  not  meet  this  requirement.  Id.  As  a  result,  EchoStar  explains  that  it  could  either  drop  OLN  or 
 switch  the  network  to  a  less  expensive  tier,  which  would  effectively  make  the  terms  available  to  EchoStar  much  less  economically  attractive.  Id.  As  another  example,  EchoStar  states  that  iN  DEMAND  conditions  access  to  its  high 
 definition  programming  on  the  payment  of  a  fee  assessed  on  a  per  digital  subscriber  basis.  EchoStar  Dec.  23,  2005  Ex  Parte  at  3.  Because  all  satellite  subscribers  are  digital,  while  only  a  minority  of  cable  customers  subscribe  to 
 digital  services,  EchoStar  asserts  that  iN  DEMANDs  pricing  scheme  has  the  discriminatory  effect  of  multiplying  the  costs  of  such  programming  to  DBS  as  compared  to  cable.  Id. 


 542  Letter  from  Richard  Ramlall,  Sr.  Vice  President,  External  and  Regulatory  Affairs,  RCN  Corp.,  to  Commissioners 
 Martin,  Adelstein,  Copps  and  Tate,  at  4-  5,  transmitted  by  letter  from  Jean  L.  Kiddoo,  Bingham  McCutchen  to  (continued.) 
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 must  have  programming  because  RCN  suffered  an  83%  drop  in  VOD  usage  when  RCN  did  not  carry  PBS  Kids.  543  EchoStar  and  RCN  urge  the  Commission  to  condition  approval  of  the  transactions  so  that 
 the  program  access  rules  would  apply  to  all  programming  owned  by  Comcast  and  Time  Warner,  including  terrestrially  delivered  programming.  544  RCN  further  recommends  that  Comcast  and  Time  Warner  be 
 required  to  waive  non-  disclosure  clauses  in  their  programming  contracts,  to  arbitrate  program  access  disputes,  and  to  be  prohibited  from  entering  into  exclusive  contracts  for  programming  and  program-related 
 enhancements.  545  EchoStar  asks  the  Commission  to  impose  a  la  carte  546  and  nondiscrimination  conditions,  547  which  would  apparently  apply  to  all  video  programming  affiliated  with  either  Comcast  or 
 Time  Warner.  Applicants  oppose  the  requests  for  conditions,  stating  that  there  is  no  basis  for  applying  the  program  access  rules  to  terrestrially-  delivered  programming  because  there  is  no  indication  that  the 
 transactions  would  cause  any  programming  to  shift  to  terrestrial  delivery.  548  Responding  to  RCNs  contention  that  Comcast  entered  into  an  exclusive  distribution  agreement  with  PBS  Sprout  to  harm  RCN, 
 PBS  Sprout  explains  that  it  chose  Comcasts  VOD  distributor,  Comcast  Media  Center  (  CMC),  as  its  exclusive  distributor  because  CMC  offered  competitive  rates  for  transmission  and  one-  stop-  shopping  for  a 


 (Continued  from  previous  page)  Marlene  H.  Dortch,  Secretary,  FCC  (May  19,  2006)  (  RCN  May  19,  2006  Ex  Parte).  RCN  contends  that  once 
 Comcast  obtained  control  over  the  joint  venture  that  develops  PBS  programming,  Comcast  terminated  RCNs  ability  to  provide  that  programming  until  a  technical  agreement  and  an  affiliation  agreement  for  a  new  linear  network  called 
 Sprout  were  negotiated.  RCN  explains  that  its  drop  in  VOD  usage  occurred  during  the  negotiation  period  for  the  new  agreements  for  PBS  Sprout  programming.  Id.  at  4.  In  May  2006,  Comcasts  distributor  became  the  exclusive 
 distributor  for  PBS  Sprout  VOD  programming.  Id.  RCN  claims  that  Comcasts  distributor  is  seeking  to  impose  onerous  contract  conditions,  including  a  term  which  would  enable  its  distributor  to  raise  rates  annually  without 
 limitation.  Id.  MAP  also  contends  that  the  Commission  should  find  Sprout  and  other  childrens  VOD  programming  to  be  must  have  programming.  Letter  from  Harold  Feld,  Senior  Vice  President,  Media  Access  Project,  to  Marlene 
 Dortch,  Secretary,  FCC  (July  3,  2006)  at  2.  543 
 RCN  May  19,  2006  Ex  Parte  at  4;  see  also  supra  note  166.  544 
 EchoStar  Comments  at  9;  RCN  Comments  at  19.  545 
 RCN  Mar.  3,  2006  Ex  Parte  at  6,  7;  RCN  May  19,  2006  Ex  Parte  at  5.  RCN  recommends  that  Applicants  disclose  all  programming  contracts  to  create  transparency,  which  RCN  contends  will  develop  a  fully  competitive 


 and  nondiscriminatory  programming  market.  At  a  minimum,  RCN  also  recommends  that  parties  to  a  programming  dispute  be  granted  access  to  other  buyers  programming  contract  terms.  RCN  Mar.  3,  2006  Ex  Parte  at  6.  RCN  also 
 recommends  implementing  arbitration  conditions.  RCN  Mar.  3,  2006  Ex  Parte  at  7.  546 
 EchoStar  proposes  the  following  condition:  Upon  request,  Comcast  and  Time  Warner  must  provide  to  any  distributor  all  programming  in  which  either  company  has  an  ownership  interest  (including  regional  sports  networks 


 and  video-  on-  demand  content)  on  an  a  la  carte  basis,  with  no  penetration  or  any  other  requirements,  including  any  terms  or  conditions  that  would  make  the  rate  effectively  discriminatory.  The  rate  for  such  a  la  carte  programming 
 shall  be  a  nondiscriminatory,  market-  based  rate,  which  is  no  higher  than  the  price  currently  being  paid  for  such  programming  under  existing  contracts,  and  shall  be  subject  to  baseball-  type  arbitration.  In  order  to  receive 
 programming  pursuant  to  this  provision,  the  distributor  must  offer  the  programming  a  la  carte  to  consumers,  but  may  also  offer  the  programming  as  part  of  any  programming  package.  Letter  from  David  K.  Moskowitz,  General 
 Counsel  and  Executive  Vice  President,  EchoStar  Satellite,  L.  L.  C.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Jan.  23,  2006)  (  EchoStar  Jan.  23,  2006  Ex  Parte)  at  2.  EchoStar  states  that  if  it  were  to  receive  programming  a  la  carte 
 from  programmers  pursuant  to  the  above  condition,  it  would  commit  to  providing  such  programming  to  consumers  on  an  a  la  carte  basis.  Id.  at  1-  2. 


 547  EchoStar  proposes  the  following  condition  In  addition  to  video  programming,  Comcast  and  Time  Warner  shall 
 provide,  under  nondiscriminatory  terms  and  conditions,  any  and  all  ancillary  video  services  in  which  they  have  an  ownership  interest,  including  all  related  internet  streaming,  interactive  applications,  broadband  applications, 


 additional  camera  angles,  streaming  data  such  as  sports  statistics,  and  any  other  related  programming  features  and  functionality.  Id. 


 548  Applicants  Reply  at  66-  67. 
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 variety  of  technical  services.  549  Furthermore,  PBS  Sprout  avers  that  several  national  networks  for  childrens  programming  exist  and  that  therefore  PBS  Kids  and  PBS  Sprout  programming  does  not  qualify 
 as  must  have.  550 
 167.  Discussion.  We  conclude  that  the  transactions  are  not  likely  to  cause  public  interest  harms  relating  to  access  to  the  Applicants  national  or  non-  sports  regional  programming.  Thus,  it  is 


 unnecessary  to  impose  the  commenters  and  petitioners  proposed  remedial  conditions. 
 168.  With  respect  to  nationally  distributed  programming,  we  find  that  the  existing  program  access  rules  will  ensure  that  competing  MVPDs  have  access  to  programming  networks  that  are  affiliated 


 with  Comcast  or  Time  Warner  and  that  the  terms  and  conditions  of  that  access  do  not  unfairly  disadvantage  competing  MVPDs.  551  All  of  the  national  programming  networks  affiliated  with  Comcast 
 and  Time  Warner  are  delivered  by  satellite  and  are  therefore  subject  to  the  program  access  rules.  The  record  is  devoid  of  evidence  demonstrating  that  the  transactions  would  increase  the  economic  or  technical 
 feasibility  of  distributing  affiliated  national  programming  terrestrially.  Furthermore,  there  is  no  evidence  in  the  record  that  Applicants  plan  to  pursue  such  a  strategy.  With  respect  to  RCNs  claims  that  PBS  Kids 
 and  PBS  Sprout  programming  qualify  as  must  have,  we  note  that  several  substitutes  exist  for  that  programming.  552  Furthermore,  as  discussed  below,  entering  into  a  national  programming  market  poses 
 fewer  barriers  to  entry  than  the  market  for  regional  sports  programming. 
 169.  Similarly,  we  find  that  the  transactions  are  not  likely  to  result  in  public  interest  harms  due  to  the  foreclosure  of  Applicants  non-  sports  regional  programming.  Although  some  of  Comcasts  and 


 Time  Warners  local  and  regional  networks  are  delivered  terrestrially  and  therefore  are  not  subject  to  the  program  access  rules,  the  record  does  not  indicate  that  an  MVPDs  lack  of  access  to  this  programming 
 would  harm  competition  or  consumers.  553  Moreover,  entry  into  the  market  for  regional  non-  sports  programming  is  not  hindered  by  a  lack  of  content,  as  is  the  case  with  respect  to  regional  sports 
 programming,  for  which  there  is  a  limited  supply  of  distribution  rights  to  desirable  local  sporting  events.  Because  the  transactions  are  not  likely  to  create  public  interest  harms  with  respect  to  national  and  non-sports 
 regional  programming,  the  conditions  advocated  by  commenters  are  unnecessary.  EchoStars 
 549  Letter  from  Sandy  Wax,  President,  PBS  KIDS  Sprout,  to  Marlene  H.  Dortch,  Secretary,  FCC  (June  5,  2006) 
 (  PBS  KIDS  Sprout  June  5,  2006  Ex  Parte)  at  1-  2.  Further,  Comcast  has  indicated  that  it  has  reached  an  agreement  to  distribute  PBS  Sprout  programming  with  another  VOD  distributor,  TVN.  Letter  from  Michael  H.  Hammer, 


 Willkie  Farr  &  Gallagher,  LLP,  Counsel  for  Adelphia  Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (July  12,  2006)  at  1. 


 550  PBS  KIDS  Sprout  June  5,  2006  Ex  Parte  at  2. 
 551  Those  rules  allow  parties  to  file  program  access  complaints  with  the  Commission.  See  47  C.  F.  R.    76.  1006. 
 Indeed,  EchoStar  has  filed  a  program  access  complaint  with  respect  to  iN  DEMANDs  alleged  discrimination.  EchoStar  v.  iN  DEMAND,  CSR  6913-  P  (filed  July  5,  2005).  That  matter  is  pending.  See  EchoStar  v.  iN  DEMAND, 


 Joint  Motion  to  Hold  in  Abeyance,  CSR-  6913P  (filed  June  12,  2006).  552 
 Nickelodeon  and  Discovery  KIDS,  among  other  national  programming  networks,  also  offer  childrens  programming.  Moreover,  we  note  that  Comcast  has  indicated  that  Sprout  is  available  for  distribution  by  all 


 multichannel  video  program  distributors.  Letter  from  Michael  H.  Hammer,  Willkie  Farr  &  Gallagher  LLP  Counsel  for  Adelphia  Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (July  6,  2006)  at  2;  see  also  PBS  KIDS 
 Sprout  June  5,  2006  Ex  Parte  at  1-  2;  Letter  from  Paul  Greco,  Vice  President  &  Deputy  General  Counsel,  PBS,  to  Commissioners  Adelstein  and  Tate,  FCC  (July  5,  2006)  at  2;  supra  note  549  (citing  Applicants  July  12,  2006  Ex 
 Parte).  553 
 [REDACTED]  Comcast  Mar.  29,  2006  Response  to  Information  Request  III.  F.  1.  at  Att.  at  1.  Even  with  respect  to  the  New  England  Cable  News,  which  commenters  cite  as  an  example  of  desirable  non-  sports  regional 


 programming,  there  is  no  evidence  establishing  that  an  MVPDs  inability  to  carry  that  network  would  materially  diminish  competition  or  otherwise  harm  consumers.  Moreover,  as  RCN  concedes,  it  has  access  to  this 
 programming,  even  though  the  network  is  delivered  terrestrially  and  therefore  is  not  subject  to  the  program  access  rules.  RCN  Comments  at  14. 
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 proposed  a  la  carte  condition,  in  particular,  lacks  any  apparent  connection  to  the  issues  raised  by  the  transactions,  and  EchoStar  has  not  demonstrated  that  the  proposed  condition  would  remedy  a  transaction-specific 
 harm.  Accordingly,  we  decline  to  adopt  the  suggested  conditions. 
 2.  Access  to  Unaffiliated  Programming/  Exclusive  Dealing 
 170.  To  provide  all  the  programming  their  subscribers  desire,  Comcast  and  Time  Warner  must  have  access  to  program  networks  with  which  they  are  not  affiliated.  There  are  two  types  of  unaffiliated 


 programming  in  this  context:  (1)  programming  from  networks  that  are  vertically  integrated  with  cable  operators  other  than  Time  Warner  or  Comcast;  and  (2)  programming  from  networks  that  are  not  vertically 
 integrated  with  any  cable  operator.  554  Programming  networks  that  are  affiliated  with  a  cable  operator  cannot  enter  into  exclusive  contracts  absent  a  waiver  of  the  program  access  rules,  and  they  also  must 
 abide  by  the  rules  nondiscrimination  provisions.  555 
 171.  Positions  of  the  Parties.  According  to  EchoStar,  by  increasing  Comcasts  and  Time  Warners  subscriber  reach,  the  transactions  would  increase  each  firms  ability  to  obtain  preferential  terms 


 from  unaffiliated  programmers,  which  ultimately  would  harm  consumers.  556  EchoStar  urges  the  Commission  to  impose  a  condition  prohibiting  Comcast  from  entering  into  exclusive  distribution 
 agreements  with  unaffiliated  programming  networks  or  from  obtaining  other  preferential  terms  or  conditions.  557  DIRECTV  contends  that  the  proposed  transactions  would  significantly  expand  the 
 geographic  areas  in  which  exclusive  agreements  would  be  economically  rational,  to  the  detriment  of  competing  MVPDs  and  ultimately  to  consumers.  558  DIRECTV  urges  the  Commission  to  address 
 potential  harms  to  competing  MVPDs  by  prohibiting  exclusive  deals  between  Comcast  or  Time  Warner  and  any  unaffiliated  RSN  in  markets  where  prescribed  levels  of  regional  concentration  would  result  post- 


 554  The  Viacom  networks,  such  as  MTV  and  Nickelodeon,  fall  into  the  second  category. 
 555  See  47  C.  F.  R    76.  1002(  c)(  2),  (4).  For  example,  the  networks  owned  by  Cablevisions  Rainbow  Media,  such  as 
 American  Movie  Classics,  fall  into  this  category.  556 
 EchoStar  Comments  at  10,  12  (citing  David  Waterman,  Vertical  Integration  and  Program  Access  in  the  Cable  Television  Industry,  47  FED.  COMM.  L.  J.  511  (1995));  see  also  CWA/  IBEW  Petition  at  17-  18  (stating  that  dominant 


 MSOs  can  negotiate  substantial  discounts  with  national  programmers,  which  harms  competing  MVPDs  that  cannot  negotiate  comparable  terms). 


 557  EchoStar  Comments  at  12-  13.  EchoStar  also  asks  that  we  require  Applicants  to  provide  all  programming  and 
 ancillary  services  on  a  non-  discriminatory  and  a  la  carte  basis,  subject  to  arbitration  conditions.  EchoStar  Jan.  23,  2006  Ex  Parte  at  1-  2.  RCN  proposes  a  similar  condition.  RCN  Comments  at  ii,  19  (stating  that  the  Commission 


 should  impose  a  prohibition  on  exclusive  or  discriminatory  arrangements  between  Comcast  or  Time  Warner  and  third-  party  suppliers  of  programming). 


 558  DIRECTV  Comments  at  13,  17-  18;  see  also  DIRECTV  Surreply  at  9-  11;  CWA/  IBEW  Petition  at  16. 
 CWA/  IBEW  also  asserts  that  exclusive  contracts  will  harm  diversity  in  local  programming.  CWA/  IBEW  Petition  at  16. 
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 transaction.  559  TCR  and  CWA/  IBEW  ask  that  we  prohibit  exclusive  agreements  by  Time  Warner  and  Comcast  with  RSNs.  560  CFA/  CU  also  ask  us  to  prohibit  exclusives  with  unaffiliated  programmers.  561 
 172.  Applicants  oppose  the  requested  conditions,  contending  that  an  MVPDs  ability  to  enter  into  exclusive  arrangements  generally  has  been  deemed  to  promote  competition  by  allowing  competing 
 MVPDs  to  differentiate  their  service  offerings  and  provide  consumers  with  a  wide  range  of  better  services.  562  Applicants  state  that  the  Commission  has  previously  considered  and  rejected  proposals  to 
 extend  program  access  requirements  to  non-  vertically  integrated  programmers  on  grounds  that  such  action  would  contradict  congressional  intent.  563 


 173.  Discussion.  We  find  that  the  transactions  will  not  increase  the  likelihood  of  public  interest  harms  deriving  from  the  Applicants  ability  to  enter  into  exclusive  contracts  with  unaffiliated 
 programmers.  First,  the  transactions  will  not  enhance  the  Applicants  incentive  or  ability  to  enter  into  exclusive  contracts  with  programming  networks  that  are  vertically  integrated  with  cable  operators  other 
 than  Comcast  or  Time  Warner.  The  program  access  rules  generally  do  not  allow  programmers  that  are  vertically  integrated  with  a  cable  operator  to  enter  into  exclusive  contracts  or  discriminate  against 
 unaffiliated  MVPDs.  In  implementing  the  ban  on  exclusivity,  the  Commission  sought  to  achieve  Congress  goal  of  establishing  a  video  programming  marketplace  that  is  competitive  and  diverse.  564 
 We  do  not  believe  that  the  transactions  will  in  any  way  weaken  the  existing  regulatory  structure  or 
 559  DIRECTV  Comments  at  v-  vi,  44.  DIRECTV  proposes  that  the  condition  apply  in  regional  markets  where  an 
 HHI  analysis  shows  that  the  transactions  would  result  in  an  increase  of  100  points  or  more  for  a  moderately  concentrated  market  and  50  points  or  more  for  a  highly  concentrated  market.  Id.  at  44  &  n.  124.  DIRECTV 


 contends  that  the  proper  geographic  market  definition  is  the  entire  RSN  footprint.  Based  on  that  geographic  market  definition,  DIRECTV  asserts  that  that  the  markets  served  by  the  following  networks  would  experience  increases  in 
 HHI  levels  of  at  least  325  points  in  a  highly-  concentrated  market  (1)  C-  SET,  (2)  Comcast  SportsNet  Philadelphia,  (3)  FSN  Florida,  (4)  Sun  Sports,  (5)  FSN  Ohio,  (6)  FSN  West/  West  2,  (7)  Mid-  Atlantic  Sports  Network,  (8) 
 Comcast/  Charter  Sports  Southeast,  (9)  Comcast  SportsNet  Mid-  Atlantic,  (10)  FSN  Pittsburgh.  Id.  at  9-  10.  560 
 Letter  from  Kenneth  R.  Peres,  PhD,  CWA,  to  Marlene  H.  Dortch,  Secretary,  FCC,  Att.  at  8,  transmitted  by  letter  from  Kenneth  R.  Peres  to  Marlene  H.  Dortch  (Mar.  9,  2006)  (  CWA  Mar.  9,  2006  Ex  Parte);  TCR  Feb.  21,  2006 


 Ex  Parte,  Att.  at  9.  CWA/  IBEW  assert  that  exclusive  contracts  will  harm  diversity  in  local  programming.  CWA/  IBEW  Petition  at  16.  CWA  asks  that  the  Commission  make  programming  available  to  all  competitors  on 
 non-  discriminatory  prices/  terms,  and  impose  arbitration  on  programming.  CWA  Mar.  9,  2006  Ex  Parte,  Att.  at  8.  561 
 CFA/  CU  Reply  Comments  at  11.  562 
 Applicants  Reply  at  63  (citing  Program  Access  Implementation  Order,  8  FCC  Rcd  at  3359    63;  United  Video,  Inc.  v.  FCC,  890  F.  2d  at  1179-  80).  Comcast  also  points  to  the  News  Corp.-  Hughes  Order,  in  which  the  Commission 


 explained  that  Congress  had  specifically  chosen  to  exclude  unaffiliated  programming  from  the  program  access  rules.  Comcast  Apr.  28,  2006  Ex  Parte  at  n.  10  (citing  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  600    291-  93).  We 
 note,  however,  that  the  discussion  in  News  Corp.-  Hughes  related  to  whether  Section  628(  c)  of  the  Communications  Act,  which  applies  exclusively  to  vertically-  integrated  entities,  gave  the  Commission  authority  to  extend  its  ban  on 
 exclusive  programming  contracts  to  non-  vertically  integrated  programmers.  In  response  to  the  Commissions  Information  Request,  Time  Warner  and  Comcast  identified  the  following  unaffiliated  video  programming  networks 
 for  which  they  have  exclusive  distribution  rights  in  areas  they  serve.  Time  Warner  identified  [REDACTED]  .  Time  Warner  April  18,  2006  Response  to  Information  Request  III.  F.  1.  at  Att.  at  1,  supplementing  Time  Warner  Dec. 
 22,  2005  Response  to  Information  Request  III.  F.  1.  at  Ex.  III.  F(  1). 
 Comcast  identified  [REDACTED]  Comcast  Dec.  22,  2005  Response  to  Information  Request  II.  F.  1  at  Ex.  COM-IIIF.  xls;  Comcast  Mar.  29,  2006  Response  to  Information  Request  III.  F.  1.  at  Att.  1.  [REDACTED]  Comcast  Mar. 


 29,  2006  Response  to  Information  Request  at  Att.  1.  Applicants  state  that  the  conditions  from  the  News  Corp.  -Hughes  Order  preclude  them  from  entering  into  exclusive  agreements  with  any  RSNs  controlled  by  News  Corp. 
 Applicants  Response  to  DIRECTV  Surreply  at  19;  Comcast  Mar.  24,  2006  Ex  Parte  at  9.  563 
 Applicants  Reply  at  64  (citing  Program  Access  Implementation  Order,  8  FCC  Rcd  at  3359    63).  564 
 Program  Access  Order,  17  FCC  Rcd  at  12160    78. 
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 somehow  permit  the  Applicants  to  skirt  the  existing  rules.  In  any  event,  Congress  recognized  that  there  is  some  value  in  certain  exclusivity  arrangements,  as  Congress  permits  the  Commission  to  approve  such 
 agreements  if  it  finds  them  to  be  in  the  public  interest  and  does  not  prohibit  the  use  of  exclusive  agreements  by  non-  vertically  integrated  programming  networks.  565 


 174.  Second,  the  record  does  not  indicate  that  the  transactions  at  issue  here  are  likely  to  materially  enhance  the  Applicants  incentive  or  ability  to  enter  into  exclusive  contracts  with  non-vertically 
 integrated  programmers.  A  cable  operator  will  enter  into  an  exclusive  distribution  agreement  with  a  non-  vertically  integrated  programming  network  only  if  doing  so  is  more  profitable  for  both  parties 
 than  a  non-  exclusive  arrangement.  The  profitability  analysis  involves  weighing  the  costs  and  benefits  of  an  exclusive  agreement  with  the  costs  and  benefits  of  a  non-  exclusive  agreement.  The  costs  of  entering 
 into  an  exclusive  agreement  include  the  costs  to  compensate  the  programming  network  for  revenue  the  network  loses  when  its  programming  is  not  sold  to  competing  MVPDs.  These  costs  may  be  recovered 
 from  any  additional  revenue  earned  by  the  cable  operator  due  to  its  acquisition  of  new  subscribers  as  a  result  of  the  exclusivity  agreement.  Costs  may  also  be  recovered  from  increased  rates  charged  to  the 
 cable  operators  existing  customers  due  to  the  loss  of  competition  from  rival  MVPDs  that  are  unable  to  offer  the  programming.  566  Since  the  exclusivity  agreement  enables  the  cable  operator  to  differentiate  its 
 program  offerings,  the  fraction  of  customers  that  leave  the  cable  operator  in  response  to  a  price  increase  is  less  than  it  otherwise  would  have  been.  The  critical  feature  in  this  calculation  is  the  degree  to  which 
 MVPD  customers  are  willing  to  switch  from  one  MVPD  to  another  to  obtain  certain  desired  programming  or  to  avoid  rate  increases.  The  higher  the  switching  rate  to  gain  access  to  exclusive  content,  the  more 
 likely  an  exclusive  contract  is  to  be  profitable  for  the  programming  network  and  a  cable  operator.  This  effect  is  countered  by  the  willingness  of  existing  customers  to  defect  to  the  competing  MVPD  in  search  of 
 lower  rates. 
 175.  Commenters  have  argued  that  Comcasts  and  Time  Warners  increased  horizontal  reach  will  serve  to  increase  their  incentives  to  enter  into  exclusive  contracts.  As  the  area  served  by  a  cable 


 operator  increases,  the  number  of  customers  that  can  be  captured  from  competing  MVPDs  is  also  likely  to  increase.  This  would  have  the  effect  of  increasing  the  total  amount  that  the  cable  operator  would  be 
 willing  to  pay  for  an  exclusive  license.  However,  an  exclusive  programming  contract  with  a  cable  operator  generally  allows  the  programming  network  to  be  carried  by  other  non-  competing  cable  operators, 
 so  that  it  is  the  willingness  to  pay  of  all  cable  operators  that  influences  the  programming  networks  decision  on  whether  to  offer  an  exclusive  license.  567  In  this  case,  the  total  willingness  to  pay  for  an 
 exclusive  arrangement  by  all  cable  operators  in  an  area  would  not  be  affected  by  consolidation  among  cable  operators,  because  the  number  of  customers  that  could  be  captured  by  all  cable  operators  from 
 competing  MVPDs  (e.  g.,  DBS)  would  remain  unchanged.  Consequently,  the  amount  of  revenue  that  could  be  paid  to  the  programmer  also  would  be  unchanged,  as  would  the  programmers  incentives  to  offer 


 565  See  47  U.  S.  C.    548(  c)(  4).  The  1992  Cable  Act  required  the  Commission  to  determine,  in  2002,  whether  the 
 exclusivity  provisions  should  sunset  or  should  be  renewed.  See  47  U.  S.  C.    548(  c)(  5).  The  Commission  renewed  the  exclusivity  provisions  for  a  period  of  five  years,  until  October  5,  2007.  See  Program  Access  Order,  17  FCC  Rcd 


 at  12161    80;  47  C.  F.  R.    76.  1002(  c)(  6).  The  Commission  indicated  in  the  Program  Access  Order  that,  during  the  year  before  the  October  5,  2007  expiration  of  the  exclusivity  provisions  of  the  program  access  rules,  it  would 
 commence  a  rulemaking  seeking  comment  on  whether  the  current  prohibition  on  exclusive  contracts  should  be  extended  beyond  2007. 


 566  Both  the  costs  and  revenues  will  vary  depending  on  consumer  interest  in  the  programming.  As  explained  above, 
 a  popular  programming  service  with  an  exclusive  arrangement  with  one  cable  operator  in  a  franchise  area  will  likely  see  a  decrease  in  revenues  due  to  the  lack  of  sales  to  other  MVPDs  serving  the  same  area. 


 567  See  Applicants  Response  to  DIRECTV  Surreply  at  16. 
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 an  exclusive  license.  568  The  record  does  not  indicate  that  the  transactions  would  materially  reduce  the  costs  of  coordinating  a  regional  cable-  only  exclusive  distribution  agreement  such  that  the  strategy  would 
 become  profitable  where  it  is  not  already  profitable  today. 
 176.  We  note  that  the  only  exclusive  arrangement  raised  in  the  record  concerning  a  network  that  is  not  affiliated  with  the  Applicants    one  between  Time  Warner  and  Carolina  Sports  Entertainment 


 Network  (  C-  SET)  --  was  ultimately  not  commercially  viable,  as  C-  SET  has  ceased  operations.  569  Though  some  of  the  programming  formerly  carried  on  C-  SET  is  now  available  on  News  14  Carolina, 
 which  is  carried  exclusively  on  Time  Warner,  the  fate  that  befell  C-  SET  indicates  that  even  exclusive  arrangements  with  a  cable  operator  serving  more  than  50%  of  the  market  can  fail  to  meet  revenue  targets 
 if  the  programming  is  not  sufficiently  valuable  to  customers.  570 
 177.  DIRECTV  alleges  that  Time  Warner  considered  entering  into  an  exclusive  arrangement  in  Cleveland  that  would  have  harmed  DBS  competition.  DIRECTV  claims  that  in  Cleveland, 


 [REDACTED]  .  571  DIRECTV  claims  that  developments  in  Charlotte  and  Cleveland  are  indicative  of  foreclosure  strategies  Comcast  and  Time  Warner  are  likely  to  pursue  as  a  result  of  the  transactions  with 
 respect  to  programming  they  do  not  own.  572  Applicants  claim  that  these  concerns  are  misplaced.  573 


 568  This  economic  principle  alleviates  concerns,  such  as  those  raised  by  DIRECTV,  about  the  Sales  Agreement 
 between  Time  Warner  and  SportsTime  Ohio.  See  DIRECTV  Mar.  27,  2006  Ex  Parte  at  6;  DIRECTV  Mar.  15,  2006  Ex  Parte  at  7. 


 569  See  Applicants  Reply  at  62;  see  also  Time  Warner  Apr.  8,  2006  Ex  Parte  at  6-  7.  C-  SET  was  affiliated  with  the 
 Charlotte  Bobcat  Organization,  which  includes  a  sports  arena  and  Charlottes  NBA  (Bobcats)  and  WNBA  (Sting)  teams.  C-  SET  ceased  operations  on  June  30,  2005.  See  Charlotte  Bobcats,  C-  SET  to  Cease  Operations  (press 


 release),  June  28,  2005.  Time  Warner  documents  indicate  that  one  of  the  reasons  C-  SET  ceased  operations  was  because  its  owner  did  not  think  that  the  RSN  would  be  profitable  if  it  were  offered  only  on  a  digital  tier.  Time 
 Warner  Mar.  14,  2006  Response  to  Information  Request  III.  J.  at  FCC2  00000132  (Andy  Bernstein,  Bobcats  Looking  for  Wide  Exposure  After  C-  SETs  Shutdown,  Street  &  Smiths  Sportsbusiness  Journal  (July  11-  17,  2005));  Time 
 Warner  Mar.  14,  2006  Response  to  Information  Request  III.  J.  at  FCC2  00003068  (Email  exchange  between  David  Auger  and  John  Bickham  of  Time  Warner  Cable  (June  29,  2005)).  DIRECTV  states  that  because  Time  Warners 
 share  of  homes  passed  in  Charlotte  is  [REDACTED]  it  was  able  to  secure  an  exclusive  contract  and  other  favorable  treatment.  See  DIRECTV  Feb.  14,  2006  Ex  Parte  at  7-  8;  see  also  DIRECTV  Mar.  15,  2006  Ex  Parte  at  8-9; 
 DIRECTV  Mar.  27,  2006  Ex  Parte  at  4;  Economic  Appendix,  App.  D  at  A-  2.  570 
 See  News  14  Carolina,  Charlotte  Bobcats  Announce  2005-  06  Television  Schedule,  Oct.  18,  2005,  at  http://  rdu.  news14.  com/  content/  sports/  charlotte_  bobcats/?  ArID=  75838&  SecID=  453  (last  visited  June  29,  2006);  see 


 also  News  14  Carolina,  About  News  14,  at  http://  www.  news14charlotte.  com/  content/  about_  us/  (last  visited  June  20,  2006).  Time  Warner  owns  100%  of  News  14  Carolina.  Twelfth  Annual  Video  Competition  Report,  21  FCC  Rcd  at 
 2644-  49  App.  C,  Table  C-  3.  571 
 See  DIRECTV  Feb.  14,  2006  Ex  Parte  at  8-  9;  see  also  DIRECTV  Mar.  15,  2006  Ex  Parte  at  7-  8;  DIRECTV  Mar.  27,  2006  Ex  Parte  at  5-  6;  DIRECTV  Apr.  3,  2006  Ex  Parte  at  8-  9.  DIRECTV  also  claims  that  STO  is  charging 


 much  higher  rates  for  its  programming  than  the  previous  RSN  did  for  the  same  programming.  [REDACTED]  DIRECTV  Apr.  3,  2006  Ex  Parte  at  8-  9,  n.  27. 


 572  See  DIRECTV  Feb.  14,  2006  Ex  Parte  at  7-  9;  see  also  DIRECTV  Mar.  15,  2006  Ex  Parte  at  8. 
 573  See  Time  Warner  Mar.  2,  2006  Ex  Parte  at  2-  5.  Time  Warner  explains  that  its  ability  to  gain  exclusive  rights  to 
 exhibit  the  Charlotte  Bobcats  games,  formerly  carried  by  C-  SET,  does  not  prevent  competitors  from  obtaining  exclusive  agreements  in  other  geographic  areas.  Time  Warner  states  that  it  believes  DIRECTV  never  attempted  to 


 acquire  rights  to  the  Charlotte  Bobcats  after  C-  SET  dissolved.  Second,  Time  Warner  states  that  it  evaluated  the  feasibility  of  securing  an  exclusive  agreement  with  the  Cleveland  Indians  only  because  the  Indians  had  offered  that 
 option  in  initial  discussions.  Id.  at  3-  4.  DIRECTV  states  that  it  is  irrelevant  whether  Time  Warner  or  the  Indians  initiated  the  discussions  and  that  Time  Warners  claim,  if  true,  indicates  that  team  ownership  of  an  RSN  is  not  a 
 check  on  Comcasts  and  Time  Warners  ability  to  prevent  MVPD  competitors  from  gaining  access  to  valuable  programming.  DIRECTV  Mar.  15,  2006  Ex  Parte  at  8-  9. 
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 178.  Although  commenters  contend  that  Comcasts  increased  subscriber  reach  will  give  it  sufficient  market  power  to  demand  that  unaffiliated  programmers  refuse  to  deal  with  other  MVPDs,  we 
 have  no  evidence  to  support  that  theory  and  thus  cannot  conclude  that  such  harm  would  occur  as  a  result  of  these  transactions,  notwithstanding  Time  Warners  actions  in  Charlotte  or  Cleveland.  In  addition, 
 Time  Warners  decision  not  to  acquire  exclusive  rights  to  the  new  RSN  in  Cleveland,  which  was  made  after  the  transactions  were  already  proposed,  suggests  that  the  transactions  have  not  enhanced  the 
 profitability  of  such  an  arrangement.  574  Absent  prima  facie  evidence  indicating  that  Comcast  or  Time  Warner  are  more  likely  as  a  result  of  the  transactions  to  gain  exclusive  rights  for  highly  valued 
 programming,  resulting  in  harm  to  competition  and  consumers,  we  lack  any  basis  for  concluding  that  the  transactions  are  likely  to  produce  public  interest  harms  with  respect  to  programming  that  is  not  affiliated 
 with  these  firms. 
 179.  Finally,  we  conclude  that  the  Acts  cable  horizontal  ownership  (Section  613)  and  program  carriage  (Section  616)  provisions  are  broad  enough  to  address  potential  harms  to  the  public  in 


 this  area,  should  they  later  materialize.  575  Section  613  of  the  Act  is  intended,  in  part,  to  prevent  any  single  cable  operator  from  achieving  market  power  to  the  degree  that  it  can  manipulate  the  programming  market 
 to  reduce  the  flow  of  video  programming  to  the  public.  As  we  have  stated  in  analyzing  other  potential  harms,  the  transactions  will  leave  Time  Warners  subscribership  levels  well  below  the  Commissions 
 existing  horizontal  limits,  and  Comcasts  horizontal  reach  will  be  almost  equivalent  to  the  horizontal  reach  the  Commission  approved  in  the  Comcast-  AT&  T  Order.  Although  the  Commissions  horizontal 
 ownership  limits  remain  the  subject  of  an  ongoing  proceeding,  we  have  no  evidence  that  the  proposed  horizontal  reach  of  either  Comcast  or  Time  Warner  will  allow  either  cable  operator  to  demand  or  profit 
 from  exclusive  contracts  with  programming  networks.  Section  616  of  the  Act  expressly  prohibits  cable  operators  from  coercing  programming  networks  into  exclusive  arrangements  as  a  condition  of  carriage.  576 
 There  is  no  evidence  in  the  record  to  suggest  that  the  Applicants  will  violate  this  prohibition  in  the  future,  but  we  will  entertain  any  complaint  by  any  party  if  the  situation  later  arises. 


 3.  Program  Carriage  Issues 
 180.  Commenters  contend  that  the  proposed  transactions  would  give  Comcast  and  Time  Warner  market  power  over  unaffiliated  national  and  regional  programmers  to  the  detriment  of  consumers. 


 Commenters  argue  that  without  sufficient  conditions,  Comcast  and  Time  Warner  would  be  able  to  use  their  post-  transaction  market  power  to  make  or  break  unaffiliated  programmers  simply  by  choosing  not 
 to  carry  them  and  that  Comcast  and  Time  Warner  would  be  more  likely  as  a  result  of  the  transactions  to  favor  their  affiliated  networks  over  unaffiliated  networks  in  carriage  decisions. 


 181.  As  discussed  below,  we  find  that  the  leased  access  condition  we  adopt  herein  will  address  concerns  about  Comcasts  and  Time  Warners  incentive  and  ability  to  discriminate  against  unaffiliated 
 programming  networks.  We  find  that  additional  measures  are  necessary  with  respect  to  unaffiliated  regional  sports  networks  to  mitigate  the  potential  harms  deriving  from  the  increased  vertical  integration 
 and  increased  regional  concentration  produced  by  the  transactions.  Accordingly,  we  adopt  a  condition  allowing  unaffiliated  RSNs  to  use  commercial  arbitration  to  resolve  disputes  regarding  carriage  on 
 Comcast  or  Time  Warner  cable  systems. 


 574  [REDACTED]  See  Time  Warner  Mar.  2,  2006  Response  to  Information  Request  III.  J.  at  TW  FCCM  0001 
 [REDACTED]  DIRECTV  also  contends  that  STO  programming  is  significantly  more  expensive  than  that  of  its  predecessor  RSN,  FSN  Ohio.  Assuming  that  the  programming  is  more  expensive,  DIRECTV  fails  to  show  how 


 these  transactions  caused  STO,  a  programmer  unaffiliated  with  either  Applicant,  to  increase  its  programming  prices.  DIRECTV  Apr.  13,  2006  Ex  Parte  at  2. 


 575  See  47  U.  S.  C.    533,  536. 
 576  See  47  U.  S.  C.    536(  a)(  2);  47  C.  F.  R.    76.  1301(  b);  see  also  Second  Program  Carriage  Order,  9  FCC  Rcd  at 
 2649    16. 
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 182.  Positions  of  the  Parties:  Nationally  Distributed  Programming.  Several  commenters  contend  that  Comcast  and  Time  Warner  have  the  financial  incentive  and  ability  to  favor  their  affiliated 
 programming  over  unaffiliated  programming  because  they  are  producers  and  packagers  of  video  programming.  577  TAC  contends  that  vertically  integrated  media  companies  like  Time  Warner  and 
 Comcast  have  a  strong  disincentive  to  embrace  new  networks,  which  compete  with  their  affiliated  networks  for  viewers,  advertising  dollars,  and  channel  capacity.  578  TAC  presents  data  showing  that 
 Comcast  and  Time  Warner  routinely  choose  to  carry  their  own  networks  and  those  owned  by  other  large  media  companies,  while  rejecting  other  networks,  and  that  they  tend  to  carry  their  own  networks  and 
 those  owned  by  other  large  media  companies  on  linear  tiers  (i.  e.,  analog  basic  tiers  or  digital  tiers),  while  relegating  other  networks  to  VOD,  which  TAC  views  as  an  inferior  carriage  option.  579  Specifically,  TAC 
 argues  that  of  114  independent  networks  seeking  national  carriage  in  recent  years,  Comcast  launched  only  one  on  a  national,  non-  premium  basis,  and  it  was  a  channel  owned  by  the  National  Football 
 League.  580  Time  Warner  also  launched  only  one  independent  channel,  The  Sportsman  Channel,  on  a  national,  non-  premium  basis.  In  contrast,  TAC  contends  that  Comcast  and  Time  Warner  carry  about  half 
 of  their  affiliated  networks  nationally.  581  TAC  argues  that  absent  appropriate  conditions,  the  proposed  transactions  likely  would  prevent  the  emergence  of  new  channels  that  are  unaffiliated  with  large  media 
 companies.  582 
 183.  CWA/  IBEW  agree  with  TAC  that  Comcast  and  Time  Warner  would  be  more  likely  to  favor  their  affiliated  programming  and  discriminate  against  unaffiliated  programmers  as  a  result  of  the 


 transactions.  583  CWA/  IBEW,  TAC,  and  Free  Press  support  proposed  conditions  to  ensure  that  programmers  unaffiliated  with  Applicants  or  other  large  media  companies  gain  carriage  on  Comcasts  and 
 Time  Warners  cable  systems.  584 
 184.  Applicants  respond  that  they  do  not  control  the  viability  of  independent  networks.  They  reject  TACs  assertion  that  in  the  present  context  independent  networks  should  exclude  networks 


 independently  owned  by  other  large  media  companies.  585  They  state  that  TACs  arguments  should  be 


 577  TAC  Petition  at  7;  CWA/  IBEW  Petition  at  19;  Free  Press  Petition  at  10;  CFA/  CU  Reply  Comments  at  7.  TAC 
 disagrees  with  the  Applicants  characterization  of  the  national  programming  market  as  competitive  and  diverse,  finding  fault  with  the  Applicants  reliance  on  the  Commissions  Eleventh  Annual  Video  Competition  Report,  which 


 TAC  contends  overstates  the  number  of  independent  networks.  TAC  Petition  at  12-  16.  578 
 TAC  Petition  at  37-  38.  Citing  Time  Warners  2004  Annual  Report,  TAC  notes  that  Time  Warners  networks  (including  broadcast  network  WB)  contributed  40%  of  operating  income,  while  its  cable  division  contributed  only 


 28.6%  of  operating  income.  TAC  states  that  Comcasts  recent  attempt  to  acquire  Disney  and  its  recent  channel  launches  demonstrate  a  clear  strategy  of  augmenting  its  cable  channel  assets.  Id.  at  38. 
 579  Id.  at  Ex.  1.  TAC  treats  networks  that  are  affiliated  with  large  media  firms  other  than  Comcast  and  Time  Warner 
 as  affiliated  in  its  comparisons  of  carriage  statistics  for  so-  called  affiliated  and  unaffiliated  networks.  Id.  580 
 TACs  definition  of  independent  networks  excludes  networks  with  financial  ties  to  Comcast,  Time  Warner,  Viacom,  News  Corp.,  NBC-  Universal,  Disney,  or  their  subsidiaries.  TAC  Petition  at  39  n.  42.  TAC  claims  that 


 networks  for  which  an  MVPD  is  the  marketing  and  distributing  agent  should  also  be  excluded.  Id.  at  12-  16.  TAC  argues  that  networks  unaffiliated  with  MSOs  but  owned  by  large  media  companies  also  get  preferential  treatment  by 
 using  their  leverage  to  secure  carriage  through  retransmission  consent  and  other  means.  Id.  at  16.  581 
 Id.  at  40-  41.  TAC  also  cites  a  GAO  Study  finding  similar  favoritism  among  cable  operators  generally.  Id.  at  43-  44  (citing  Michael  E.  Clements  and  Amy  D.  Abramowitz,  Ownership  Affiliation  and  the  Programming  Decisions  of 


 Cable  Operators,  U.  S.  Government  Accountability  Office,  at  16).  582 
 Id.  at  45.  583 
 CWA/  IBEW  Petition  at  5.  584 
 See  supra  para.  105.  585 
 Applicants  Reply  at  81. 
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 raised  and  addressed,  if  at  all,  in  the  Commissions  pending  cable  horizontal  and  vertical  ownership  proceeding.  Applicants  contend  that  TACs  arguments  are  belied  by  a  robust  programming 
 marketplace.  586  Applicants  further  assert  that  TACs  claims  directly  contradict  the  courts  recognition  in  Time  Warner  II  that  customers  with  access  to  an  alternative  MVPD  may  switch  providers,  thereby 
 constraining  whatever  market  power  the  first  MVPD  may  be  thought  to  have.  587 
 185.  Regional  Programming.  TCR  raises  concerns  regarding  the  transactions  effects  on  an  unaffiliated  RSNs  ability  to  obtain  carriage  on  Comcast  and  Time  Warner  systems  where  either 


 Applicant  owns  a  competing  RSN.  588  According  to  TCR,  to  evaluate  whether  the  post-  transaction  entity  would  have  an  increased  incentive  and  ability  to  engage  in  anticompetitive  foreclosure  strategies 
 regarding  RSNs,  the  Commission  should  apply  a  three-  prong  inquiry  that  asks  (1)  whether  the  post-transaction  company  would  have  a  large  enough  share  of  the  relevant  MVPD  households  such  that  the 
 MVPDs  decision  not  to  carry  a  competing  programmers  offering  would  cause  a  competing  programmer  to  exit  the  market  or  would  deter  a  potential  entrant  from  entering;  (2)  whether  the  company  owns 
 affiliated  programming  from  which  it  could  benefit  by  the  reduction  in  programming  competition;  and  (3)  whether  any  additional  profits  attained  by  the  reduction  of  competition  in  the  regional  market  would 
 outweigh  the  lost  earnings  from  carriage  of  the  competing  programming  on  the  MVPDs  own  systems.  589  TCR  maintains  that  the  transactions  satisfy  each  of  these  criteria  and  therefore  are  likely  to  have 
 anticompetitive  effects. 
 186.  TCR  notes  that  Comcast  owns  and  operates  a  regional  sports  network,  CSN  Mid-  Atlantic,  that  carries  a  substantial  amount  of  regional  sports  programming  in  the  Baltimore  and  Washington 


 DMAs.  590  As  set  forth  in  its  separately-  filed  program  carriage  complaint,  TCR  alleges  that  Comcast  has  refused  unlawfully  to  carry  TCRs  network,  MASN,  which  has  the  right  to  exhibit  the  Washington 
 Nationals  baseball  games,  in  order  to  protect  its  own  competing  RSN.  591  TCR  contends  that  Comcast  has  also  attempted  to  leverage  its  market  power  to  dissuade  other  MVPDs  from  carrying  TCRs  competitive 
 regional  sports  content.  592  TCR  asserts  that  other  MVPDs  have  been  intimidated  by  Comcast  and  thus  far  have  refused  to  sign  affiliation  agreements  for  MASN.  593 


 586  Applicants  assert  that  the  number  of  programming  networks  has  more  than  tripled  from  106  in  1994,  to  278  in 
 1999,  and  to  388  in  2004,  an  increase  of  268%.  Applicants  Reply  at  35-  36.  Comcast  further  points  out  that  it  owns  no  attributable  interest  in  any  of  the  top  20  rated  cable  networks.  Comcast  Mar.  29,  2006  Ex  Parte,  Att.  at  2. 


 587  Applicants  Reply  at  36  (citing  Time  Warner  II,  240  F.  3d  at  1134). 
 588  TCR  Petition  at  7,  10  &  13-  14. 
 589  Id.  at  13  (citing  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23266). 
 590  Id.  at  6.  Among  other  programming  it  provides,  CSN  Mid-  Atlantic  has  a  license  to  produce  and  exhibit  certain 
 Orioles  baseball  games  on  pay  television  through  the  2006  Major  League  Baseball  season,  Washington  Wizards  basketball  games  through  the  2011  National  Basketball  Association  season,  and  the  Washington  Capitals  matches 


 through  the  2016  National  Hockey  League  season.  591 
 Id.  at  7.  592 
 Id.  at  10.  TCR  alleges  that  Comcast  has  attempted  to  intimidate  other  MVPDs  in  the  Washington  metropolitan  area  by  directing  CSN  Mid-  Atlantic  to  write  a  letter  to  them  falsely  alleging  that  TCR  had  improperly  represented 


 that  it  controls  the  rights  to  exhibit  Orioles  games  beginning  in  2007.  TCR  contends  that  [  b]  ecause  TCR  had  approached  distributors  with  a  package  of  games    Nationals  games  beginning  immediately  and  Orioles  games 
 beginning  in  the  2007  season    the  intent  of  CSNs  letter  was  to  thwart  TCRs  efforts  to  televise  Nationals  games.  Id. 
 593  Id.  However,  DIRECTV,  Cox,  Charter,  and  RCN  carry  MASN  programming  in  the  Baltimore-  Washington 
 region.  TCR  also  contends  that  Comcast  would  have  the  same  incentive  and  ability  to  refuse  to  carry  MASN  after  CSNs  licensing  rights  to  carry  certain  Orioles  games  expire  in  2006.  Id.  at  15. 
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 187.  TCR  claims  that  Comcasts  subscribers  in  the  Washington  DMA  have  not  responded  to  the  unavailability  of  MASN  by  switching  to  alternative  MVPDs  that  carry  MASN.  594  TCR  contends  that 
 post-  transaction,  Comcast  would  be  able  to  deny  MASN  access  to  more  cable  homes  in  the  Washington  DMA,  driving  MASN  from  the  market.  595  TCR  states  that  Comcast  would  then  secure  the  distribution 
 rights  to  the  Washington  Nationals  games  for  its  own  network,  thereby  extending  its  downstream  market  power  into  the  upstream  programming  market.  596  Using  pre-  transaction  and  post-  transaction  data  on  ten 
 DMAs  in  which  Comcast  owns  an  RSN,  TCR  argues  that  the  tipping  point  for  the  successful  foreclosure  of  an  unaffiliated  RSN,  i.  e.,  the  point  at  which  foreclosure  becomes  profitable,  is  approximately  49%  of 
 MVPD  subscribers  in  a  DMA  and  that  Comcasts  post-  merger  subscriber  share  in  the  Washington  DMA  will  be  53%.  597 


 188.  Applicants  assert  that  the  proposed  transactions  present  no  threats  to  independent  programmers.  598  They  contend  that  much  of  TCRs  petition  recounts  assertions  made  in  its  program 
 carriage  complaint  against  Comcast  and  that  TCR  fails  to  establish  grounds  for  the  imposition  of  any  conditions  on  the  proposed  transactions.  599  Applicants  claim  that  Comcasts  decision  not  to  carry  TCRs 
 programming  is  not  the  product  of  discrimination  based  on  affiliation  and  that  TCRs  real  concern  involves  a  contractual  dispute  regarding  TCRs  right  to  exhibit  the  Baltimore  Orioles  baseball  games.  600 
 Applicants  further  contend  that  the  market  for  regional  programming  networks  is  robust.  601  They  dispute  TCRs  calculation  of  post-  transaction  concentration,  claiming  that  MASNs  footprint  includes  nearly 
 twice  as  many  subscribers  as  TCR  claims  and  that  Comcasts  post-  transaction  share  of  subscribers  in  that  footprint  would  be  much  smaller  than  TCR  contends.  602  Applicants  further  assert  that  since  Adelphia  is 
 not  carrying  MASN,  the  transactions  will  not  result  in  a  loss  of  programming  to  consumers  who  currently  receive  it.  603 


 594  See  Letter  from  David  C.  Frederick,  Kellogg,  Huber,  Hansen,  Todd,  Evans  &  Figel,  Counsel  for  TCR,  to  Marlene 
 H.  Dortch,  Secretary,  FCC  (Nov.  14,  2005)  (  TCR  Nov.  14,  2005  Ex  Parte)  at  5-  6.  595 
 See  Letter  from  David  C.  Frederick,  Kellogg,  Huber,  Hansen,  Todd,  Evans  &  Figel,  Counsel  for  TCR,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Nov.  22,  2005)  (  TCR  Nov.  22,  2005  Ex  Parte)  at  Att.  (Economic  Analysis  of 


 Comcasts  and  Time  Warners  Proposed  Acquisition  of  Adelphia)  at  3.  596 
 Id.  597 
 TCR  Feb.  21,  2005  Ex  Parte,  Att.  at  7-  8.  The  DMAs  listed  are  Orlando,  Tampa,  Atlanta,  Washington,  Sacramento,  Miami,  Philadelphia,  Baltimore,  Detroit,  and  Chicago.  In  an  earlier  filing,  using  seven  DMAs  in  which 


 Comcast  owns  an  RSN,  TCR  argues  that  the  tipping  point  is  between  61%  and  69%  of  homes  passed  in  a  DMA,  alleging  that  Comcast  is  already  discriminating  against  its  competitors  where  its  market  share  is  at  these  levels. 
 TCR  Nov.  22,  2005  Ex  Parte,  Att.  at  6-  7.  TCR  hypothesizes  that  the  profitability  of  withholding  RSNs  in  such  markets  would  induce  Comcast  to  foreclose  competing  RSNs  operating  in  those  markets  in  order  to  acquire  and  then 
 withhold  their  programming.  TCR  Nov.  22,  2005  Ex  Parte,  Att.  at  6-  7.  598 
 Applicants  Reply  at  71-  83.  599 
 Id.  at  72.  600 
 Id.  at  72-  73.  601 
 Applicants  note  that  there  are  now  96  regional  programming  networks,  an  increase  of  12  networks  over  the  total  in  2003,  and  that  the  number  of  regional  sports  networks  has  increased  from  29  in  1998  to  38  in  2004.  Id.  at  35-  36. 


 602  Letter  from  James  R.  Coltharp,  Comcast  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Jan.  10,  2006)  (  Comcast 
 Jan.  10,  2006  Ex  Parte)  at  3-  4.  TCR  contends  in  response  that  its  inability  to  reach  Comcasts  subscribers  in  Baltimore  and  Washington  will  severely  imperil  its  viability  and  that  its  ability  to  reach  subscribers  outside  of  the 


 core  market  for  the  Washington  Nationals  will  not  be  sufficient  to  sustain  the  network.  Letter  from  David  C.  Frederick,  Kellogg,  Huber,  Hansen,  Todd,  Evans  &  Figel,  PLLC,  Counsel  for  TCR,  to  Marlene  H.  Dortch, 
 Secretary,  FCC  (Feb.  17,  2006)  at  6.  603 
 Applicants  Reply  at  74. 
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 189.  Discussion.  We  find  that  the  leased  access  condition  we  adopt  above  is  sufficient  to  address  concerns  regarding  the  carriage  of  nationally  distributed  and  non-  sports  regional  programming.  604 
 With  respect  to  regional  sports  programming,  based  on  the  record,  we  find  that  the  transactions  will  increase  the  incentive  and  ability  of  Comcast  and  Time  Warner  to  deny  carriage  to  RSNs  that  are  not 
 affiliated  with  them.  As  noted  above,  the  programming  provided  by  RSNs  is  unique  because  it  is  particularly  desirable  and  cannot  be  duplicated.  605  Moreover,  as  a  result  of  the  transactions,  the  sports 
 rights  with  a  regional  interest  become  more  valuable  to  the  Applicants.  Accordingly,  post-  transaction  Time  Warner  and  Comcast  will  have  an  increased  incentive  to  deny  carriage  to  rival  unaffiliated  RSNs 
 with  the  intent  of  forcing  the  RSNs  out  of  business  or  discouraging  potential  rivals  from  entering  the  market,  thereby  allowing  Comcast  or  Time  Warner  to  obtain  the  valuable  programming  for  its  affiliated 
 RSNs.  We  further  find  that  once  this  occurs,  Comcast  and  Time  Warner  would  have  the  incentive  to  raise  its  rival  MVPDs  costs  through  a  uniform  price  increase  or  engage  in  other  anticompetitive  strategies  such 
 as  withholding  the  programming  from  its  rival  MVPDs.  We  find  that  this  strategy  would  be  made  less  likely  by  the  arbitration  and  program  access  conditions  that  we  adopt  but  recognize  that  Comcast  and 
 Time  Warner  nevertheless  may  be  more  likely  to  succeed  in  foreclosing  an  unaffiliated  RSN  as  a  result  of  the  transactions.  As  a  result,  consumers  could  be  unable  to  view  the  RSNs  programming  or  could  have 
 to  pay  higher  costs  for  the  programming.  Accordingly,  to  prevent  such  behavior,  we  adopt  a  further  condition  requiring  Comcast  and  Time  Warner  to  engage  in  commercial  arbitration  with  any  unaffiliated 
 RSN  that  is  unable  to  reach  a  carriage  agreement  with  either  firm,  should  the  RSN  elect  to  use  the  arbitration  remedy. 


 190.  Condition.  To  constrain  Comcasts  and  Time  Warners  ability  to  unlawfully  refuse  carriage  to  unaffiliated  RSNs,  we  impose  a  remedy  based  on  commercial  arbitration  such  as  that  imposed 
 in  the  News  Corp.-  Hughes  Order,  as  set  forth  in  Appendix  B.  Under  the  carriage  condition,  for  a  period  of  six  years  from  the  adoption  date  of  this  Order,  and  in  lieu  of  filing  a  program  carriage  complaint  with 
 the  Commission,  an  RSN  unaffiliated  with  any  MVPD  that  has  been  denied  carriage  by  Comcast  or  Time  Warner  may  submit  its  carriage  claim  to  arbitration  within  30  days  after  the  denial  of  carriage  or  within 
 ten  business  days  after  release  of  this  Order,  whichever  is  later.  The  arbitration  rules  would  be  the  same  as  those  for  the  MVPDs,  except  that  the  arbitrator  has  45  days  to  issue  a  decision,  to  accommodate 
 deciding  the  threshold  issue  of  whether  carriage  should  be  required.  The  Commission  shall  issue  its  findings  and  conclusions  not  more  than  60  days  after  receipt  of  a  petition  for  review  of  the  arbitrators 
 award,  which  may  be  extended  by  the  Commission  for  one  period  of  60  days. 
 191.  We  impose  this  commercial  arbitration  condition  as  an  alternative  for  unaffiliated  RSNs  to  our  existing  program  carriage  complaint  procedures.  By  establishing  an  additional  procedure  and 


 specific  time  frames  for  a  full  resolution  of  an  unaffiliated  RSNs  complaint,  we  seek  to  alleviate  the  potential  harms  to  viewers  who  are  denied  access  to  valuable  RSN  programming  during  protracted 
 carriage  disputes.  The  timely  resolution  of  carriage  disputes  is  particularly  important  given  the  seasonal  nature  of  RSN  programming. 


 VII.  ANALYSIS  OF  OTHER  POTENTIAL  PUBLIC  INTEREST  HARMS 
 192.  We  consider  below  whether  the  proposed  transactions  are  likely  to  lead  to  public  interest  harms  with  respect  to  the  carriage  of  broadcast  signals;  diversity;  deployment  of  services  based  on 


 economic  status;  race  and  ethnicity;  employment  practices;  Internet  related  content,  applications,  or  services;  and  equipment  and  interactive  television.  We  also  consider  allegations  that  Applicants  lack  the 
 requisite  character  qualifications  to  hold  Commission  licenses.  We  conclude  that  the  transactions  are  not  likely  to  result  in  the  potential  harms  alleged  by  commenters  and  petitioners.  We  find  that  some  of  the 
 concerns  raised  are  not  transaction-  specific  and  are  more  appropriately  addressed  in  other  proceedings. 


 604  See  supra  Section  VI.  C.  2.  a. 
 605  See  supra  para.  124. 
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 We  further  find  that  the  character  qualifications  issues  raised  in  the  record  do  not  warrant  denial  of  the  applications  or  the  imposition  of  conditions. 
 A.  Broadcast  Programming  Issues 
 193.  Several  commenters  allege  that  the  transactions  will  harm  local  broadcast  service.  Specifically,  commenters  assert  that  increased  regional  cable  concentration  post-  transaction  will  affect  the 


 ability  of  local  broadcast  stations  to  gain  carriage  on  Comcast  and  Time  Warner  systems  through  retransmission  consent  negotiations,  to  reach  agreements  with  Comcast  and  Time  Warner  about  the 
 carriage  of  multicast  digital  signals  and  about  other  digital  transition  issues,  and  to  disseminate  programming  and  viewpoints  of  interest  to  local  communities. 


 194.  Free  Press  asserts  that  the  level  of  ownership  concentration  resulting  from  the  transactions  will  create  regional  monopolies  and  monopsonies  in  the  top  25  DMAs  and  will  thereby  have 
 a  dramatic  impact  on  the  negotiating  power  of  broadcast  licensees.  It  alleges  that  Comcast  and  Time  Warner  will  be  able  to  dictate  the  terms  of  and  freely  deny  carriage  to  licensees,  causing  viewers  to  suffer 
 as  a  consequence.  606  More  specifically,  Free  Press  anticipates  that  Comcast  and  Time  Warner  may  force  broadcasters  to  accept  the  downgrading  of  their  digital  signals  to  analog  quality  or  place  the  local 
 broadcast  digital  signals  on  more  expensive  programming  tiers.  Free  Press  concludes  that  the  additional  regional  market  power  exercised  by  Comcast  and  Time  Warner  post-  transaction  would  delay  the  national 
 transition  to  digital  TV  by  increasing  the  conflict  between  broadcasters  and  cable  operators.  607  Echoing  these  concerns,  NAB  urges  the  Commission  to  adopt  conditions  to  ensure  that  large,  regionally  clustered 
 cable  systems  will  negotiate  reasonably  with  local  broadcast  stations  for  retransmission  consent  and  for  the  carriage  of  digital  signals,  including  multicast  programming  streams.  608  NAB  indicates  that  such 
 conditions  would  serve  the  public  interest  by  promoting  the  widespread  dissemination  of  information  from  a  multiplicity  of  sources,  including  those  not  under  the  control  of  the  cable  operator.  609 


 195.  KVMD,  the  licensee  of  Station  KVMD-  DT,  Channel  23,  in  Twentynine  Palms,  California,  610  contends  that  the  transfer  of  Adelphia  cable  systems  to  Comcast  and  Time  Warner  may 
 harm  localism  by  preventing  viewers  from  receiving  its  Spanish-  language,  local  news  and  public  affairs,  sports,  and  lifestyle  programming.  611  KVMD  asserts  that,  without  carriage  on  a  cable  system,  its  array  of 
 programs  might  otherwise  be  unavailable  to  many  viewers  in  the  Los  Angeles  market.  KVMD  fears  that  Comcast  and  Time  Warner,  after  they  acquire  Adelphias  Los  Angeles  systems,  will  attempt  to  remove 
 certain  communities  from  the  KVMD  market.  612  KVMD  states  that  unless  Comcast  and  Time  Warner 
 606  Free  Press  Petition  at  37-  38;  see  also  NAB  Reply  Comments  at  5-  6  (asserting  that  cable  operators  that  own 
 programming  have  a  particularly  strong  incentive  to  disfavor  unaffiliated  content  providers  seeking  distribution).  607 
 Free  Press  Petition  at  37-  38.  608 
 NAB  Reply  Comments  at  1-  2.  NAB  notes  that  the  cable  industry  as  a  whole  is  concentrated  and  clustered  regionally  and  is  dominated  by  an  increasingly  smaller  number  of  larger  entities.  Id.  at  5  (emphasis  in  original);  id. 


 at  7  (citing  Turner  Broadcasting  System,  Inc.  v.  FCC,  512  U.  S.  622,  648  (1994)  (  Turner  I)).  609 
 Id.  at  7-  8;  see  also  Free  Press  Petition  at  38  (noting  the  critical  role  performed  by  local  broadcasters  in  maintaining  a  diverse  media  environment,  fostering  localism,  and  maintaining  an  informed  and  engaged  citizenry) 


 (citing  Turner  I,  512  U.  S.  at  622).  610 
 KVMDs  city  of  license  is  located  within  the  Los  Angeles  DMA,  and  its  signal  is  currently  carried  on  Adelphia  systems  in  that  market.  According  to  KVMD,  carriage  of  its  signal  on  the  Adelphia  cable  systems  in  Los  Angeles 


 allows  it  to  reach  more  viewers  than  it  could  by  over-  the-  air  transmission,  and  the  increased  advertising  revenues  it  receives  based  on  its  greater  audience  reach  allows  it  to  develop  more  unique  programming.  KVMD  Comments  at 
 2-  3.  611 
 Id.  at  3.  See  Net  Goes  Local  in  L.  A.,  MULTICHANNEL  NEWS,  Sept.  5,  2005,  at  13. 
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 continue  to  carry  the  independent  stations  currently  carried  by  Adelphia,  the  proposed  transactions  will  not  serve  the  Commissions  localism  policies.  613 
 196.  Applicants  urge  the  Commission  to  disregard  the  issues  relating  to  broadcast  signal  carriage  and  retransmission  consent  as  not  transaction-  specific,  or,  in  the  alternative,  as  lacking  merit.  In 
 addition,  they  maintain  that  requests  by  commenters  to  address  problems  generally  related  to  the  digital  transition  or  to  alter  the  retransmission  consent  negotiation  process  are  unrelated  to  the  instant 
 transactions.  614  More  specifically,  Applicants  contend  that  concerns  about  must  carry  and  retransmission  consent  are  more  appropriately  handled  on  an  industry-  wide  basis,  rather  than  in  the  context  of  merger 
 review.  615  Applicants  charge  that  KVMDs  concerns  relate  to  the  statutory  market  modification  procedures  under  the  must-  carry  regime  and  should  not  be  resolved  in  the  context  of  the  instant 
 proceeding.  616 
 197.  Discussion.  There  are  currently  several  open  Commission  rulemaking  proceedings  in  which  examination  of  the  myriad  technical  and  policy  issues  surrounding  the  digital  transition  are  being 


 addressed.  Further,  we  expect  cable  operators  to  abide  by  the  Commissions  policies  regarding  material  degradation  of  a  television  signal. 


 B.  Viewpoint  Diversity  and  First  Amendment  Issues 
 198.  Several  commenters  assert  that  the  transactions  would  reduce  programming  and  viewpoint  diversity  by  granting  Comcast  and  Time  Warner  gatekeeper  control  over  video  and  broadband 


 platforms.  617  Free  Press  maintains  that  the  ability  of  Comcast  or  Time  Warner  to  accept  or  reject  advertising  or  other  programming  content  based  on  its  perceived  political  orientation  or  willingness  to 
 address  controversial  subjects  has  a  chilling  effect  that  deprives  the  public  of  new  perspectives  and  ideas.  618  Free  Press  and  CWA/  IBEW  assert  that  the  proposed  transactions  would  result  in  irreparable 


 (Continued  from  previous  page)  612  KVMD  states  that  both  Comcast  and  Time  Warner  have  previously  brought  market  modification  proceedings 
 against  Station  KVMD  in  an  effort  to  remove  the  station  from  their  cable  communities  in  the  Los  Angeles  market.  See  Time  Warner  Petition  for  Special  Relief,  18  FCC  Rcd  21384  (MB  2003)  (granting  Time  Warners  petition  to 
 remove  its  cable  communities  in  the  Los  Angeles  DMA  from  the  stations  market);  Comcast  Corporation  Petition  for  Modification  of  the  Los  Angeles,  California  DMA,  19  FCC  Rcd  5245  (MB  2004)  (granting  in  part  and  denying  in 
 part  Comcasts  petition  to  remove  its  cable  communities  in  the  Los  Angeles  DMA  from  the  stations  market).  KVMD  has  filed  petitions  for  reconsideration  in  both  proceedings.  KVMD  Comments  at  3-  4. 


 613  KVMD  Comments  at  5. 
 614  Applicants  Reply  at  25. 
 615  Applicants  state  that  both  Comcast  and  Time  Warner  have  exemplary  track  records  in  their  carriage  of  digital 
 broadcast  signals.  Comcast  is  carrying  multicast  channels  both  pursuant  to  the  agreement  between  the  National  Cable  Television  Association  (  NCTA)  and  the  Association  of  Public  Television  Stations  (  APTS)  and  as  a  result 


 of  ongoing  commercial  negotiations.  Likewise,  Time  Warner  represents  that  it  has  entered  into  agreements  for  the  digital  carriage  of  CBS,  Fox,  NBC,  and  ABC  stations.  Time  Warner  has  agreed  to  carry  the  digital  signals  of  Public 
 Broadcasting  Service  (  PBS)  stations  prior  to  adoption  of  the  NCTA/  APTS  agreement.  Applicants  Reply  at  92,  94. 


 616  Id.  at  92.  Applicants  state  that  other  cable  operators  also  have  pursued  market  modification  rulings  involving 
 KVMD.  See,  e.  g.,  Lone  Pine  Television,  Inc.,  18  FCC  Rcd  23955  (MB  2003)  (granting  market  modification  petition  involving  three  stations,  including  KVMD).  Applicants  add  that  any  suggestion  that  they  have  pursued  such  market 


 modifications  involving  KVMD  for  improper  reasons  is  baseless.  Applicants  Reply  at  92  n.  314.  617 
 See  CWA/  IBEW  Petition  at  1;  Free  Press  Petition  at  11-  12,  15-  22,  27-  30;  TAC  Petition  at  7-  8,  17,  20;  NATOA  Reply  Comments  at  9,  14-  18;  BTNC  Sept.  7,  2005  Ex  Parte  at  1-  2,  6  (stating  that  [  t]  he  censorship  of  minority 


 viewpoints,  ideas  and  voices  in  the  cable  marketplace  is  simply  a  by-  product  of  the  industrys  consolidation).  618 
 Free  Press  Petition  at  30.  In  support  of  its  argument,  Free  Press  states  that  Comcast  and  Time  Warner  rejected  political  advertisements  from  SBC  in  support  of  legislation  before  the  Texas  legislature,  while  running 


 advertisements  from  the  Texas  Cable  and  Telecommunications  Association  against  the  bills;  that  Comcast  refused  to  (continued.) 
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 harm  to  the  First  Amendment  principle  of  diversity  in  communication  and  would  enhance  the  ability  of  Comcast  and  Time  Warner  to  influence  public  debate  in  14  of  the  top  25  markets.  619  Free  Press  states  that 
 the  Commission  is  responsible  for  preventing  the  concentration  of  the  mass  media  and  means  of  communication  in  the  hands  of  a  few  private  corporations  and  must  foster  diversity  of  content.  620  NHMC 
 states  that  regardless  of  the  carriage  of  specific  stations  or  networks,  the  Commission  should  impose  conditions  on  the  transactions  that  require  Applicants  to  provide  programming  that  responds  to  local 
 community  needs.  621 
 199.  In  addition,  Free  Press  asserts  that  the  transactions  would  result  in  sufficient  concentration  in  the  markets  for  high-  speed  Internet,  cable  programming,  and  cable  advertising  to  permit 


 Comcast  and  Time  Warner  to  exclude  from  public  consideration  or  inhibit  discussion  of  positions  and  perspectives  that  they  oppose  for  economic  or  ideological  reasons.  622  Free  Press  asserts  that  it  does  not 
 matter  whether  the  companies  refusal  to  sell  advertising  or  the  decision  to  block  e-  mail  from  politically-oriented  web  addresses  may  be  justified  as  a  matter  of  editorial  discretion  or  network  management.  623 
 The  companies  past  behavior  is  relevant,  according  to  Free  Press,  because  it  demonstrates  that  Comcast  and  Time  Warner  already  possess  the  power  to  interfere  with  political  discourse,  and  the  geographic 
 concentration  that  will  result  from  grant  of  the  Applications  will  aggravate  this  effect.  624 
 200.  NATOA  similarly  states  that  additional  regional  concentration  resulting  from  the  transactions  could  enable  Comcast  and  Time  Warner  to  exercise  control  over  political  speech  from  local 


 officials  and  prevent  local  voters  from  hearing  contrary  perspectives.  625  NATOA  maintains  that  the  transactions  would  give  Comcast  and  Time  Warner  vastly  increased  control  over  political  speech, 
 including  the  ability  to  use  their  media  services  to  bombard  local  residents  with  self-  serving  advertisements  urging  acceptance  of  unfavorable  renegotiations  of  franchise  agreements.  626  Lastly, 


 (Continued  from  previous  page)  sell  advertising  time  in  New  Hampshire  prior  to  the  state  primary  because  the  buyer  supported  marijuana  use  and  a 
 change  in  legislation  concerning  that  use;  and  that  Comcast  refused  to  sell  advertising  time  during  President  Bushs  State  of  the  Union  address  to  an  organization  that  opposed  the  use  of  military  force  in  Iraq.  Id.  at  28-  29. 


 619  Id.  at  28;  CWA/  IBEW  Petition  at  1;  see  also  TAC  Petition  at  50-  52.  See  also  Letter  from  Andrew  Jay 
 Schwartzman,  Media  Access  Project,  Counsel  for  Free  Press,  et  al.  to  Marlene  H.  Dortch,  Secretary,  FCC  (May  1,  2006)  at  1  (stating  that  in  view  of  the  substantial  concerns  raised  by  commenters  about  the  anticompetitive  effects 


 of  the  proposed  transactions,  the  Commission  should,  at  least,  impose  conditions  to  safeguard  competition  and  protect  the  publics  First  Amendment  rights  to  speak  and  to  be  heard). 


 620  Free  Press  Petition  at  26  (citing  Red  Lion  Broadcasting  v.  FCC,  395  U.  S.  367  (1969)). 
 621  Letter  from  Harold  Feld,  Senior  Vice  President,  Media  Access  Project,  Counsel  for  National  Hispanic  Media 
 Coalition,  to  Marlene  H.  Dortch,  Secretary,  FCC  (May  1,  2006)  (  NHMC  May  1,  2006  Ex  Parte)  at  1.  622 
 Free  Press  Petition  at  12,  27.  Free  Press  enumerates  several  examples  of  Comcasts  and  Time  Warners  past  actions  that  give  Free  Press  concern  about  their  post-  transaction  behavior.  See  supra  note  606.  In  addition,  MAP 


 requests  that  the  Commission  protect  access  to  local  advertising  markets  by  establishing  an  expedited  complaint  process  that  protects  political  speech  and  rival  product  advertisements.  See  MAP  Feb.  23,  2006  Ex  Parte,  Att.  A  at 
 4.  623 
 See  infra  paras.  212-  23  for  a  discussion  of  issues  relating  to  broadband  competition  and  network  management.  624 
 Free  Press  Petition  at  27.  625 
 NATOA  Reply  Comments  at  9;  see  also  TAC  Petition  at  7-  8,  17,  20  (stating  that  the  proposed  transfer,  if  approved  without  conditions,  would  lock  in  the  regional  dominance  of  Comcast  and  Time  Warner,  undermining 


 diversity  in  MVPD  programming,  which  is  fundamental  to  political  and  civic  discourse).  626 
 NATOA  Reply  Comments  at  9. 
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 NATOA  criticizes  the  Applicants  for  using  their  growing  regional  and  national  market  power  to  default  on  their  responsibilities  to  support  PEG  channels.  627 
 201.  In  contrast,  several  commenters  contend  that  the  proposed  transactions  would  increase  programming  diversity,  and  other  commenters  argue  that  Commission  restrictions  on  the  ownership  of 
 cable  systems  could  harm  the  public  interest.  628 
 202.  Similarly,  Applicants  reject  allegations  that  the  transactions  would  threaten  the  number  of  available  media  voices  or  frustrate  the  Commissions  diversity  goal.  629  They  disagree  with  commenters 


 who  assert  that  the  transactions  would  diminish  head-  to-  head  competition,  contending  that  the  transactions  would  not  reduce  horizontal  competition.  Thus,  Applicants  contend,  consumers  would  not 
 experience  a  reduction  in  the  number  of  MVPDs  among  which  they  could  choose  or  the  number  of  available  media  voices.  630  Comcast  and  Time  Warner  assert  that  they  have  repeatedly  demonstrated 
 their  clear  business  interest  in  offering  a  wide  array  of  programming  options  to  their  customers  and  have  continually  offered  more  diversity,  rather  than  less.  631  Responding  to  commenters  who  fear  a  decline  in 
 political  discourse  if  the  transactions  are  approved,  Applicants  state  that  such  assertions  are  misguided  and  that  Comcast  and  Time  Warner  have  long  provided  a  considerable  amount  of  diverse,  locally  oriented 
 material  through  their  regional  programming  and  through  VOD  service.  632 
 203.  Further,  Applicants  assert  that  cable  operators  speech  is  protected  under  the  First  Amendment  and  that  any  limit  on  speech  in  favor  of  viewpoints  advocated  by  Free  Press  is  the  very 


 antithesis  of  the  First  Amendment.  633  Applicants  reject  assertions  that  consolidation  will  stifle  diversity  in  advertising,  noting  that  local  advertisers  may  also  purchase  advertising  time  from  broadcast  stations  or 


 627  Id.  at  14-  15.  NATOA  argues  that  subscribers  value  the  availability  of  public  access  channels  and  programming, 
 suggesting,  for  example,  that  cable  subscribers  are  more  likely  to  watch  city  council  meetings  on  television  than  to  attend  such  meetings  in  person.  Id. 


 628  FFBC  states  that  Comcast  and  Time  Warner  would  provide  the  level  of  investment  needed  to  ensure  that 
 religious,  minority,  and  ethnic  communities  are  able  to  deliver  their  respective  messages.  FFBC  Comments  at  2-  3.  A  number  of  Hispanic  organizations,  as  well  as  other  groups,  have  submitted  letters  in  support  of  the  transactions, 


 averring  that  they  will  result  in  greater  programming  diversity.  See,  e.  g.,  Letter  from  Alex  Lopez  Negrete,  Chairman,  Association  of  Hispanic  Advertising  Agencies,  to  Chairman  Kevin  Martin,  FCC  (Aug.  2,  2005);  Letter 
 from  Alex  Ferro,  Executive  Director  of  the  Florida  Hispanic  Legislative  Caucus,  to  Chairman  Martin  and  Commissioners  Abernathy,  Copps  and  Adelstein,  FCC  (Aug.  2,  2005);  Letter  from  Jose  Pepe  Lopez,  President  of 
 the  Latin  Chamber  of  Commerce  of  Broward  County,  Inc.,  to  Chairman  Martin  and  Commissioners  Abernathy,  Copps  and  Adelstein,  FCC  (Aug.  2,  2005);  Letter  from  Rev.  Dr.  Walter  B.  Johnson,  Jr.,  Executive  Director  of 
 Alliance  for  Community  Peace,  to  Chairman  Kevin  Martin,  FCC  (Aug.  4,  2005).  In  addition,  Thierer  and  English  warn  that  any  ownership  restrictions  on  media  that  interfere  with  business  structures  and  plans  could  affect  the 
 quality  and  quantity  of  the  media  by  artificially  limiting  market  structures  or  outputs  and  by  diminishing  the  editorial  discretion  of  media  operators.  They  add  that  ownership  restrictions  amount  to  architectural  censorship  in 
 violation  of  the  First  Amendment.  Thierer  and  English  Comments  at  39-  40.  629 
 Applicants  Reply  at  41.  Moreover,  Applicants  assert  that  any  legitimate  diversity  issues  should  be  addressed  through  a  rulemaking  proceeding  and  not  in  the  context  of  a  transaction  that  does  not  violate  any  ownership  rules. 


 Id.  at  40.  630 
 Id.  at  41.  Applicants  cite  several  Commission  decisions  for  the  proposition  that  MSOs  serving  different  franchise  areas  are  not  competitors,  including  Implementation  of  Sections  of  the  Cable  Television  Consumer  Protection  and 


 Competition  Act  of  1992;  Rate  Regulation,  9  FCC  Rcd  4119,  4134    29  (1994);  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20613    130  (2002);  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23282    90,  n.  241.  Applicants  Reply  at  41 
 n.  151.  631 
 Applicants  Reply  at  40-  41.  632 
 Id.  at  41  n.  147.  633 
 Id.  at  40. 
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 from  non-  broadcast  programming  networks  carried  on  Comcast  and  Time  Warner  systems.  634  Moreover,  Applicants  claim  that  they  exercise  no  control  over  the  majority  of  advertising  content  carried  on  their 
 cable  systems  and  lack  the  ability  or  desire  to  dominate  or  suppress  any  advertising  message.  In  response  to  Free  Press  claims  that  Applicants  have  declined  to  carry  advertisements  from  competing  ISPs, 
 Applicants  state  that  they  have  a  right  to  decline  advertisements  that,  they  believe,  will  subject  them  to  liability,  that  will  reflect  unfavorably  on  their  companies,  or  that  promote  competing  businesses.  635 


 204.  Discussion.  Although  some  commenters  fear  that  Comcast  and  Time  Warner  will  reject  programming  or  issue  advertisements  and  thereby  stifle  viewpoint  diversity,  to  the  extent  that  commenters 
 are  seeking  a  right  of  access  to  cable  systems  to  disseminate  issue  advertising,  neither  the  Communications  Act  nor  the  Commissions  rules  mandate  such  rights  of  access  to  cable  systems.  636  We 
 decline  to  adopt  such  a  right  in  the  context  of  this  specific  transaction.  To  the  extent  commenters  raise  concerns  about  Applicants  compliance  with  local  franchise  agreements  as  they  pertain  to  the 
 establishment  and  operation  of  PEG  channels,  they  are  encouraged  to  raise  such  concerns  with  local  franchise  authorities.  637 


 205.  Finally,  we  recognize  that  commenters  arguments  may  be  relevant  to  issues  addressed  in  our  proceeding  to  examine  the  Commissions  cable  horizontal  ownership  limits.  In  its  Cable  Ownership 
 Second  Further  Notice,  the  Commission  sought  comment  on  the  ability  and  incentive  of  individual  cable  operators  or  groups  of  cable  operators  to  restrict  the  flow  of  programming  to  the  consumer.  638  The  Cable 


 634  Id.  at  42. 
 635  Id.  We  note  that  Comcast  and  Time  Warner  have  recently  reaffirmed  their  policy  regarding  advertisements  from 
 companies  that  offer  competing  video,  broadband  and  telephony  products,  or  ads  that  are  considered  misleading.  According  to  trade  reports,  Comcast  and  Time  Warner  rejected  ads  from  Verizon  regarding  franchise  reform 


 legislation  in  New  Jersey,  stating  that  Verizon  could  air  its  ads  on  broadcast  stations.  COMMUNICATIONS  DAILY,  Mar.  16,  2006,  at  9-  10. 


 636  Viewpoint  diversity  refers  to  the  availability  of  media  content  reflecting  a  variety  of  perspectives.  See  2002 
 Biennial  Regulatory  Review  Review  of  the  Commissions  Broadcast  Ownership  and  Other  Rules  Adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of  1996,  18  FCC  Rcd  13620,  13627    19  (2003)  (  2002  Biennial 


 Review  Order),  affd  in  part  and  remanded  in  part,  Prometheus  Radio  Project  v.  F.  C.  C.,  373  F.  3d  372  (2004),  cert.  denied,  125  S.  Ct  2902-  04  (2005).  Viewpoint  diversity  is  most  easily  measured  through  the  amount  of  news  and 
 public  affairs  programming,  which  relates  most  directly  to  the  Commissions  core  policy  objectives  of  facilitating  robust  democratic  discourse  in  the  media.  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13631    32.  If,  however, 
 advertisements  fall  within  the  scope  of  our  political  programming  rules,  and  parties  experience  difficulty  in  placing  such  political  announcements  on  cable  systems,  our  rules  may  provide  redress.  All  cable  operators  are  required  to 
 abide  by  the  Commissions  political  programming  rules  applicable  to  cable  television.  See,  e.  g.,  47  C.  F.  R.    76.  205,  76.  206,  76.  1611,  76.  1615,  76.  1701,  76.  1715.  The  no-  censorship  provision  of  the  Communications  Act 
 of  1934,  as  amended,  which  embodies  First  Amendment  free  speech  principles,  prohibits  the  Commission  from  involving  itself  in  the  content  of  specific  programs  or  otherwise  engaging  in  activities  that  might  be  regarded  as 
 program  censorship.  See  47  U.  S.  C.    326.  The  Commission  can  neither  prevent  licensees  from  airing  a  particular  program,  nor  require  that  particular  speech  contained  within  specific  programming  be  balanced. 


 637  MAP  states  that  the  Commission  should  establish  a  complaint  process  in  the  event  that  the  Applicants  renege  on 
 their  promises  regarding  PEG  and  local  franchising  conditions.  See  MAP  Feb.  23,  2006  Ex  Parte  at  4.  Based  on  the  current  statutory  framework  for  local  cable  franchise  issues,  including  PEG  channels,  we  decline  to  adopt  this 


 recommendation  and  encourage  commenters  to  raise  their  compliance  concerns  with  the  appropriate  local  officials.  638 
 Cable  Ownership  Second  Further  Notice,  20  FCC  Rcd  at  9394    31;  see  also  47  U.  S.  C.    533(  f)(  2)(  A)  (requiring  the  Commission  to  ensure  that  no  cable  operator  or  group  of  cable  operators  can  unfairly  impede,  either  because  of 


 the  size  of  any  individual  operator  or  because  of  joint  actions  by  a  group  of  operators  of  sufficient  size,  the  flow  of  video  programming  from  the  video  programmer  to  the  consumer);  47  U.  S.  C.    521(  4)  (requiring  the  government  to 
 assure  that  cable  communications  provide  and  are  encouraged  to  provide  the  widest  possible  diversity  of  information  sources  and  services  to  the  public). 
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 Ownership  Second  Further  Notice  solicits  comment  on  the  role  and  weight  diversity  concerns  should  play  in  setting  cable  ownership  limits.  639 
 C.  Deployment  of  Services  Based  on  Economic  Status  or  Race/  Ethnicity 
 206.  In  its  petition  to  deny,  NHMC  challenges  Applicants  claims  that  the  proposed  transactions  will  accelerate  the  deployment  of  advanced  telecommunications  service,  new  cable 


 programming  services,  and,  generally,  improved  service  to  local  communities.  640  NHMC  states  that  the  rapid  deployment  of  advanced  service  and  cable  programming  does  not  serve  the  public  interest  when  a 
 large  segment  of  the  population  is  excluded.  641 
 207.  NHMC  explains  that  there  has  been  a  significant  history  of  electronic  redlining  in  minority  communities,  particularly  in  the  deployment  of  advanced  services,  but  also  in  the  provision  and 


 maintenance  of  basic  services  such  as  telephone  and  cable  service.  642  NHMC  claims  that  providers  have  sometimes  failed  to  provide  certain  services  to  minority  communities  or  have  provided  inferior 
 services.  643  NHMC  states  that  economic  redlining  is  contrary  to  the  public  interest,  adding  that  no  service  provider  should  deny  services  to  a  group  of  potential  customers  because  of  the  communitys  ethnicity  or 
 income  levels.  NHMC  asks  that  the  transfer  applications  be  denied,  or,  in  the  alternative,  be  conditioned  to  address  these  concerns.  NHMC  proposes  that  the  Commission  establish  enforceable  benchmarks  for 
 customer  service  and  the  deployment  of  service,  including  advanced  services  to  minority  communities.  644  NHMC  requests  that  if  the  Applications  are  approved,  the  Commission  should  impose  conditions  that 
 ensure  that  the  upgrade  of  Adelphia  systems    a  public  interest  benefit  on  which  Comcast  relies    takes  place  in  a  timely  manner  in  minority  neighborhoods.  645 


 208.  NATOA  expresses  similar  concerns  that,  in  upgrading  the  Adelphia  systems,  the  Applicants  will  attempt  to  cherry  pick  neighborhoods  for  the  deployment  of  advanced  services  or  new 


 639  Cable  Ownership  Second  Further  Notice,  20  FCC  Rcd  at  9396-  97    35-  36.  The  Commissions  inquiry  focuses 
 on  the  rulings  in  Time  Warner  I  and  Time  Warner  II  interpreting  section  613(  f)(  2)(  G)  of  the  Act.  47  U.  S.  C.    533(  f)(  2)(  G).  See  Time  Warner  I,  211  F.  3d  1313  (D.  C.  Cir.  2000);  Time  Warner  II,  240  F.  3d  1126  (D.  C.  Cir.  2001). 


 The  statute  requires  the  Commission  to  ensure  that  any  cable  ownership  limits  imposed  do  not  impair  the  development  of  diverse  and  high  quality  video  programming.  Time  Warner  I  upheld  the  constitutionality  of  section 
 613(  f)  and  found  that  Congress  reasonably  concluded  that  dramatic  concentration  in  the  cable  industry  threatened  the  diversity  of  information  available  to  the  public  and  could  form  a  barrier  to  the  entry  of  new  cable  programmers. 
 Time  Warner  I,  211  F.  3d  at  1320.  However,  Time  Warner  II  concluded  that  Congress  had  not  given  the  Commission  authority  to  impose,  solely  on  the  basis  of  the  diversity  precept,  a  limit  that  does  more  than  guarantee  a 
 programmer  two  possible  outlets  sufficient  to  achieve  viability.  Time  Warner  II,  240  F.  3d  at  1135.  640 
 NHMC  Petition  at  6-  7.  641 
 Id.  at  6.  642 
 Id.  at  4.  NHMC  does  not  allege  that  Comcast  and  Time  Warner  have  engaged  in  electronic  redlining.  However,  NHMC  asserts  that  the  significant  history  of  redlining  in  minority  communities,  coupled  with  Comcasts  particular 


 record  of  insensitivity  to  the  Hispanic  community,  warrants  conditions  on  the  transactions  to  ensure  that  the  public  interest  benefits  claimed  by  the  Applicants  will  be  shared  with  the  entire  community.  Id.  at  5. 
 643  Id.  at  3.  In  particular,  according  to  NHMC,  minority  communities  in  urban  areas  often  receive  inferior  service 
 and  experience  severe  outages  of  electronic  services.  NHMC  also  cites  the  Commissions  2000  report  pursuant  to  section  706  of  the  Telecommunications  Act,  which  concluded  that  many  low  income  and  minority  consumers  are 


 barred  from  obtaining  advanced  services  due  to  the  poor  quality  and  lack  of  services  provided  to  these  communities.  See  Deployment  of  Advanced  Telecommunications  Capability  to  All  Americans  in  a  Reasonable  and  Timely 
 Fashion,  and  Possible  Steps  to  Accelerate  Such  Deployment  Pursuant  to  Section  706  of  the  Telecommunications  Act  of  1996,  15  FCC  Rcd  20918  (2000). 


 644  NHMC  Petition  at  2. 
 645  NHMC  May  1,  2006  Ex  Parte  at  1. 
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 cable  services  by  claiming  that  the  provision  of  such  services  is  not  subject  to  the  relevant  Adelphia  cable  franchise  agreement.  646  NATOA  states  that  where  LFAs  have  negotiated  build-  out  schedules  with 
 Adelphia,  or  with  the  Applicants  as  part  of  the  transfer  negotiation,  the  Commission  must  condition  its  approval  of  the  Applications  on  the  Applicants  compliance  with  these  negotiated  terms.  647 


 209.  Comcast  and  Time  Warner  assert  that  they  will  complete  their  upgrades  to  the  Adelphia  cable  systems  in  a  fair  and  non-  discriminatory  manner.  In  addition,  both  Comcast  and  Time  Warner 
 emphatically  deny  that  they  have  engaged  in  or  will  engage  in  any  sort  of  economic  or  other  redlining.  648  They  state  that  both  companies  are  deeply  committed  to  upgrading  their  cable  systems  and  improving 
 services  for  all  of  their  subscribers,  including  those  in  low  income  areas,  and  detail  a  number  of  instances  in  which  deployment  of  their  services,  including  advanced  services,  occurred  first  in  minority  or  low 
 income  areas.  649 
 210.  Discussion.  The  Commission  is  deeply  committed  to  ensuring  that  broadband  and  advanced  services  are  deployed  to  all  Americans,  regardless  of  their  race,  ethnicity,  or  income  level.  650 


 Deployment  of  facilities  or  the  provision  of  services  in  a  discriminatory  manner  would  be  contrary  to  section  1  of  the  Communications  Act  651  and  the  fundamental  goal  of  the  1996  Act  to  bring 
 communications  services  to  all  Americans.  652 
 211.  Based  on  the  record,  we  find  no  evidence  that  Applicants  have  engaged  in  discriminatory  deployment  in  the  past  or  that  such  behavior  is  likely  in  the  future.  Accordingly,  we  decline  to  deny  the 


 Applications  on  this  basis  or  to  condition  the  grant  on  benchmarks  for  deployment  of  service. 
 D.  Potential  Internet-  Related  Harms 
 212.  Several  commenters  assert  that  the  proposed  transactions  would  reduce  competition  in  the  market  for  residential  high-  speed  Internet  access  or  would  facilitate  discrimination  by  Comcast  or 


 Time  Warner  against  unaffiliated  providers  of  Internet  content  or  applications.  653  We  find,  however,  that 
 646  NATOA  Reply  Comments  at  12. 
 647  Id. 
 648  Applicants  Reply  at  108.  The  Applicants  assert  that  NHMC  has  presented  no  evidence  to  support  its  allegations 
 of  economic  redlining.  649 
 Id.  at  109  (agreeing  that  economic  redlining  is  contrary  to  the  public  interest).  In  support  of  their  assertions  that  Comcast  and  Time  Warner  have  taken  affirmative  steps  to  prevent  economic  redlining,  the  Applicants  cite  to 


 Comcasts  efforts  to  provide  more  channels  and  advanced  services  in  Flint,  Michigan,  which  the  Applicants  claim  is  one  of  the  most  economically  depressed  cities  in  the  region.  The  Applicants  also  note  Comcasts  efforts  in 
 Albuquerque,  New  Mexico,  including  low  income  neighborhoods  in  the  Uptown  Area,  South  Valley,  and  Southern  Heights.  These  areas,  according  to  the  Applicants,  were  among  the  first  to  be  upgraded  to  allow  for  digital  and  high- 
 speed  Internet  service.  Time  Warner  also  highlights  its  deployment  of  advanced  services  to  minority  communities,  stating  that  among  the  first  Time  Warner  systems  to  be  upgraded  in  1998  as  part  of  the  $5  billion  company-  wide 
 upgrade  effort  was  El  Paso,  Texas,  which  it  describes  as  one  of  the  most  demographically  challenged  systems  owned  by  Time  Warner.  In  addition,  Time  Warner  states  that  in  Minneapolis  it  completed  upgrades  first  in  North 
 Minneapolis,  one  of  the  lowest  socio-  economic  areas  in  the  city.  Id.  at  109-  111.  650 
 See  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9879    145.  651 
 Section  1  of  the  Communications  Act  charges  the  Commission  with  ensuring  that  communications  services  are  made  available,  so  far  as  possible,  to  all  the  people  of  the  United  States,  without  discrimination  on  the  basis  of  race, 


 color,  religion,  national  origin,  or  sex.  47  U.  S.  C.    151.  652 
 See  Joint  Managers  Statement,  S.  Conf.  Rep.  No.  104-  230  at  113;  see  also  47  U.  S.  C.    254(  b)(  3)  (stating  that  the  1996  Act  envisions  that  consumers  and  those  in  rural,  insular,  and  high  cost  areas,  should  have  access  to 


 telecommunications  and  information  services).  653 
 Free  Press  Petition  at  15-  17,  30-  32,  44-  45;  IBC  Comments  at  3. 
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 the  evidence  does  not  demonstrate  that  the  transactions  are  likely  to  result  in  anticompetitive  conduct  or  interference  with  subscriber  access  to  Internet  content  or  applications  on  the  part  of  either  Time  Warner  or 
 Comcast. 
 213.  Free  Press  contends  that  the  Supreme  Courts  Brand  X  decision  654  allows  cable  providers  to  block  any  content  or  service  offered  over  cable  broadband  facilities,  and  that  the  transactions  would 


 give  Time  Warner  and  Comcast  greater  incentives  to  do  so.  655  In  particular,  Free  Press  claims  that  as  a  result  of  increased  regional  and  national  concentration,  Comcast  and  Time  Warner  might  block  their 
 customers  access  to  non-  affiliated  providers  of  VoIP  (such  as  Vonage)  and  video  programming  competitors  (such  as  TiVo  or  Netflix)  and  has  blocked  e-  mail  traffic.  656 


 214.  Free  Press  urges  the  Commission  to  adopt  ISP  access  and  interoperability  conditions  similar  to  those  imposed  by  the  Federal  Trade  Commission  and  the  Commission  in  connection  with  AOL-Time 
 Warner  transaction.  657  In  the  alternative,  Free  Press  proposes  that  the  post-  transaction  entities  be  prohibited  from  discriminating  against  providers  of  content,  video,  or  voice  services  offered  via 
 broadband.  658  CWA/  IBEW  propose  that  the  Commission  require  interoperability  of  network  devices  and  content  neutrality  on  Comcasts  and  Time  Warners  post-  transaction  broadband  platforms.  659  IBC 
 proposes  that  the  Commission  require  Comcast  and  Time  Warner  to  program  their  set-  top  boxes  to  be  Internet-  accessible  and  to  devote  one  cable  channel  to  Internet  access  via  television.  660 


 215.  In  response  to  these  allegations,  the  Applicants  state  that  [  t]  he  record  is  entirely  void  of  any  evidence  that  Comcast  or  Time  Warner  have  ever  degraded,  blocked  or  otherwise  discriminated 
 against  any  packets  delivered  by  any  IP-  enabled  service  application.  661  They  emphasize  that  their  desire  to  satisfy  their  subscribers  and  compete  against  other  Internet  providers  provides  sufficient  incentive  for 
 them  to  allow  their  subscribers  unfettered  access  to  all  the  content,  services  and  applications  that  the  Internet  has  to  offer.  662 


 654  National  Cable  &  Telecomm.  Assn  v.  Brand  X  Internet  Services,  125  S.  Ct.  2688  (2005). 
 655  Free  Press  Petition  at  15-  17,  30. 
 656  Id.  at  15-  17,  31. 
 657  Id.  at  15-  16,  44-  55;  see  also  Letter  from  Parul  Desai  and  Andrew  J.  Schwartzman,  Media  Access  Project,  on 
 behalf  of  Free  Press,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  28,  2006)  at  2;  Letter  from  Andrew  J.  Schwartzman,  President,  Media  Access  Project,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Apr.  20,  2006)  at  1.  The 


 conditions  imposed  by  the  Commission  and  the  FTC  are  discussed  infra  at  para.  221.  658 
 Free  Press  Petition  at  45;  see  also  Letter  from  Harold  Feld,  Senior  Vice  President,  Media  Access  Project,  to  Marlene  H.  Dortch,  Secretary,  FCC  (July  6,  2006)  at  2;  Letter  from  Henry  Goldberg,  Goldberg,  Godles,  Wienter  & 


 Wright,  Attorney  for  Skype,  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (June  14,  2006)  (  Skype  June  14,  2006  Ex  Parte)  at  1.  In  addition,  Skype  discussed  the  possibility  of  conditioning  approval  of  the  transactions  on  adherence 
 to  the  Commissions  Policy  Statement,  discussed  below.  Skype  June  14,  2006  Ex  Parte  at  1;  see  also  infra  para.  223. 
 659  CWA/  IBEW  Reply  Comments  at  3.  We  presume  that  by  network  devices,  CWA/  IBEW  refer  to  personal  video 
 recorders  and  other  electronic  devices,  such  as  wireless  routers,  that  can  be  used  in  connection  with  residential  broadband  Internet  access.  See  Free  Press  Petition  at  15. 


 660  IBC  Comments  at  3-  4. 
 661  Applicants  Reply  at  89;  see  also  Applicants  Apr.  19,  2006  Ex  Parte  at  9. 
 662  Applicants  Reply  at  90;  see  also  Thierer  and  English  Comments  at  34-  38;  Letter  from  Seth  A.  Davidson, 
 Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Apr.  7,  2006)  at  2  (reiterating  that  open  access  conditions  proffered  by  MAP  and  others  are  unrelated  to  this  proceeding,  and  in 


 any  event,  are  neither  necessary  nor  appropriate);  Letter  from  Michael  H.  Hammer,  Willkie,  Farr  &  Gallagher,  LLP,  to  Marlene  H.  Dortch,  Secretary,  FCC  (May  23,  2006)  (  Applicants  May  23,  2006  Ex  Parte)  at  1-  2. 
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 216.  The  Applicants  aver  that  market  forces  will  ensure  that  consumers  needs  are  met  because  the  Applicants  face  strong  competition  from  other  providers  of  broadband  services.  Further,  they 
 explain  that  they  need  flexibility  to  experiment  with  business  models  to  respond  to  the  dynamic  marketplace  and  they  should  not  be  restricted  in  their  ability  to  invest  in  and  expand  their  networks  to 
 satisfy  their  customers.  663  The  Applicants  also  contend  that  direct  enforcement  of  the  Commissions  broadband  Policy  Statement  would  be  difficult  to  administer  and  would  hamper  the  Applicants  efforts  to 
 resolve  issues  related  to  copyright  protection,  peer-  to-  peer  applications,  spam,  and  identity  theft.  664 
 217.  Discussion.  We  conclude  that  the  transactions  are  not  likely  to  increase  incentives  for  either  Comcast  or  Time  Warner  to  engage  in  conduct  that  is  harmful  to  consumers  or  competition  with 


 respect  to  the  delivery  of  Internet  content,  services,  or  applications  given  the  competitive  nature  of  the  broadband  market.  We  agree  with  Applicants  that  competition  among  providers  of  broadband  service  is 
 vigorous.  Broadband  penetration  has  rapidly  increased  over  the  last  year  with  more  Americans  relying  on  high  speed  connections  to  the  Internet  for  access  to  news,  entertainment  and  communication.  665  Increased 
 penetration  has  been  accompanied  by  more  vigorous  competition.  In  turn,  greater  competition  limits  the  ability  of  providers  to  engage  in  anticompetitive  conduct,  a  concern  of  some  commenters,  since 
 subscribers  would  have  the  option  of  switching  to  alternative  providers  if  their  access  to  content  were  blocked  or  degraded.  In  particular,  incumbent  LECs  share  of  the  U.  S.  broadband  market  has  gradually 
 increased  over  the  past  few  years  through  increased  deployment  and  increasingly  aggressive  pricing.  666  Statistics  collected  by  the  Commission  indicate  that  the  percentage  of  broadband  subscribers  served  by 
 cable  modem  service  has  decreased  over  time,  from  58%  in  2003  to  56%  in  2005,  while  the  percentage  served  by  DSL  has  increased  from  38%  to  41%.  667  Additionally,  consumers  have  gained  access  to  more 
 choice  in  broadband  providers.  For  example,  while  the  percentage  of  zip  codes  served  by  only  one  broadband  provider  has  dropped  from  16.4%  in  2003  to  9.3%  in  2005,  the  percentage  of  zip  codes  served 
 by  four  or  more  broadband  providers  has  increased  from  43.7%  in  2003  to  59.7%  in  2005.  668 
 218.  This  growth  in  the  number  of  providers  is  reflected  in  an  increasing  number  of  subscribers  to  new  broadband  technologies.  For  example,  cable  modem  service  and  DSL  service  are 


 facing  emerging  competition  from  deployment  of  cellular,  WiFi,  and  WiMAX-  based  competitors,  and 
 663  Applicants  May  23,  2006  Ex  Parte  at  2. 
 664  Id. 
 665  At  the  end  of  2000,  84.6%  of  U.  S.  households  with  Internet  access  were  dial-  up  customers.  Now,  high-  speed 
 Internet  access  rivals  that  of  dial-  up:  of  the  70.3  million  Internet  access  households  in  June  2005,  33.7  million  had  high-  speed  access.  See  Eighth  Annual  Video  Competition  Report,  17  FCC  Rcd  at  1265    43;  Twelfth  Annual  Video 


 Competition  Report,  21  FCC  Rcd  at  2567    137.  See  also  AB  Bernstein  Research,  Broadband  Update:  Value  Share  and  Subscriber  Share  Have  Diverged,  Apr.  7,  2006  (  Bernstein  Broadband  Update)  at  1-  2  (stating  that 
 [  d]  uring  4Q05,  Internet  penetration  (including  both  dial-  up  and  broadband  connections)  as  a  percentage  of  U.  S.  households  increased  70bps  [basis  points]  to  64%,  or  around  two-  thirds  of  all  households  and  has  been  gradually 
 accelerating).  666 
 See  Bernstein  Broadband  Update  at  1;  see  also  The  Buckingham  Research  Group,  The  Last  Mile  Monitoring  Quarterly  Trends  in  Telecommunications,  Video  and  Data,  Nov.  30,  2005,  at  56  (reporting  that  [  w]  hile  cable 


 continues  to  dominate  the  HSD  market,  its  share  has  been  falling  in  recent  quarters,  as  DSL  has  become  a  more  competitive  and  widely  available  alternative  .  .  .  .  Not  only  has  DSL  now  beaten  cable  in  net  adds  for  three  straight 
 quarters,  the  3Q  [of  2005]  figure  also  stood  out  as  the  highest  incremental  share  ever  for  this  product.);  Bernstein  Research  Call,  Broadband  Competition  Intensifies  as  Penetration  Advances;  Price  and  Speed  Define  Main  Battle 
 Lines,  June  15,  2005  (  Bernstein  Research  Call)  at  1  (projecting  that  DSL  will  gain  800  bps  [basis  points]  incremental  share  over  the  next  five  years,  to  44%  of  the  residential  broadband  market  in  2010). 
 667  FCC,  High-  Speed  Services  for  Internet  Access:  Status  as  of  June  30,  2005,  Apr.  2006,  at  Table  1  (  High-  Speed 
 Services  for  Internet  Access:  2005  Status  Report).  This  report  and  previous  releases  of  the  High-  Speed  Services  for  Internet  Access  report  are  available  at  http://  www.  fcc.  gov/  wcb/  iatd/  comp.  html  (last  visited  June  20,  2006). 


 668  Id.  at  Table  5. 
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 broadband  over  power  line  (BPL)  providers.  669  Commission  statistics  indicate  that  satellite  and  wireless  broadband  lines  more  than  doubled  between  June  2004  and  June  2005,  from  422,000  to  970,000,  with 
 BPL  lines  surveyed  for  the  first  time  in  June  2005.  670  Some  analysts  project  that  some  of  these  technologies  have  the  potential  to  reduce  further  cables  share  of  the  broadband  market  beyond  the 
 projected  continued  losses  to  DSL,  particularly  in  rural  areas.  671  Press  reports  indicate  that  both  DBS  providers  have  signed  distribution  agreements  with  WildBlue  Communications,  Inc.,  a  provider  of 
 satellite-  broadband  Internet  service.  672 
 219.  The  only  specific  factual  allegation  in  the  record  concerns  an  instance  of  e-  mails  being  inadvertently  blocked  by  a  Comcast  firewall  provider.  673  In  this  regard,  Free  Press  alleges  that  Comcast 


 blocked  e-  mails  generated  by  an  organization  called  After  Downing  Street  (  ADS),  resulting  in  e-mails  containing  a  reference  to  ADS  being  blocked  for  one  week,  without  notice  to  ADS  or  subscribers. 
 Free  Press  asserts  that,  although  the  problem  was  blamed  on  an  anti-  spam  measure  deployed  by  Symantec  under  contract  with  Comcast,  when  ADS  contacted  Symantec  directly,  the  block  was  immediately 
 removed.  674  There  is  no  evidence  that  the  block  was  motivated  by  subjective  judgments  regarding  the  content  being  transmitted  or  that  it  was  anything  other  than  the  result  of  a  legitimate  spam  filtering  effort 
 by  Symantec.  Comcast  states  that  it  uses  Symantec  Corporations  Brightmail  software  solution  to  filter  out  spam  e-  mails.  To  avoid  giving  unscrupulous  spam  senders  a  roadmap  for  avoiding  filters, 
 Symantec  does  not  explain  how  it  determines  which  e-  mails  are  spam.  However,  Symantec  did  explain  to  Comcast  that  it  had  received  thousands  of  complaints  from  end  users,  saying  that  ADS  e-  mails  were 
 spam.  Comcast  stated  that  the  e-  mails  were  blocked  because  they  exhibited  many  signature  characteristics  of  unwanted  bulk  e-  mail.  675  ISPs  blocking  of  spam  is  a  common  and  generally  approved 


 669  Wireless-  Fidelity  (  Wi-  Fi)  is  an  interoperability  certification  for  wireless  local  area  network  (LAN)  products. 
 This  term  has  been  applied  to  devices  developed  in  accordance  with  the  Institute  of  Electrical  and  Electronics  Engineers  (IEEE)  802.11  standard.  Twelfth  Annual  Video  Competition  Report,  21  FCC  Rcd  at  2604    225  &  n.  785. 


 WiMAX  is  a  wireless  standard,  embodied  in  IEEE  Standard  802.16,  that  can  provide  wireless  high-  speed  Internet  access  with  speeds  up  to  75  Mbps  and  ranges  up  to  30  miles.  Id.  at  2604    226.  BPL  is  a  new  type  of  carrier  current 
 technology  that  provides  access  to  high  speed  broadband  services  using  electric  utility  companies  power  lines.  In  the  Matter  of  Amendment  of  Part  15  Regarding  New  Requirements  and  Measurement  Guidelines  for  Access 
 Broadband  Over  Power  Line  Systems,  Carrier  Current  Systems,  Including  Broadband  Over  Power  Line  Systems,  19  FCC  Rcd  21265,  21266  (2004);  see  also  47  C.  F.  R.    15.  3(  ff)  (defining  the  term  Access  BPL). 
 670  High-  Speed  Services  for  Internet  Access:  2005  Status  Report  at  Table  1.  A  separate  FCC  report  indicates  that 
 cellular-  based  high-  speed  Internet  access  service  has  been  launched  in  at  least  some  portion  of  counties  containing  278  million  people,  or  roughly  97  percent  of  the  U.  S.  population  .  .  .  .  Implementation  of  Section  6002(  b)  of  the 


 Omnibus  Budget  Reconciliation  Act  of  1993  (Annual  Report  and  Analysis  of  Competitive  Market  Conditions  With  Respect  to  Commercial  Mobile  Services),  20  FCC  Rcd  15908,  15953-  4    119  (2005). 
 671  Bernstein  Research  Call  at  1  (projecting  that  [  c]  able  modems  share  of  the  broadband  market  is  projected  to 
 decline  from  64%  currently  to  51%  by  2010,  with  both  DSL  and  alternative  technologies  such  as  WiMax  driving  the  share  loss). 


 672  See,  e.  g.,  Karen  Brown,  WildBlue  Inks  EchoStar,  DirecTV,  MULTICHANNEL  NEWS,  June  9,  2006,  available  at 
 http://  www.  multichannel.  com/  article/  CA6342695.  html  (last  visited  June  20,  2006);  SkyREPORT,  WildBlue  Nails  DISH  and  DirecTV  Deals,  NRTC  Reacts,  June  12,  2006,  at 


 http://  www.  skyreport.  com/  view.  cfm?  ReleaseID=  1939#  Story2  (last  visited  June  20,  2006).  673 
 Free  Press  cites  to  an  article  published  on  the  ADS  website,  which  explained  that  ADS  e-  mails  were  not  getting  through  to  its  members  who  subscribed  to  Comcasts  cable  modem  service.  Free  Press  Petition  at  31;  David 


 Swanson,  How  Comcast  Censors  Political  Content,  Common  Dreams  News  Center,  July  16,  2005,  at  http://  www.  commondreams.  org/  views05/  0716-  20.  htm  (last  visited  June  20,  2006). 
 674  Free  Press  Petition  at  31. 
 675  Comcast  Dec.  22,  2005  Response  to  Information  Request  IV.  B. 
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 practice,  676  and  there  is  nothing  in  the  record  here  to  suggest  that  the  blockage  was  other  than  the  automatic  functioning  of  the  anti-  spam  software. 
 220.  There  is,  other  than  this,  no  record  evidence  indicating  that  Comcast  or  Time  Warner  has  willfully  blocked  a  web  page  or  other  Internet  content,  service,  or  application  via  its  high  speed  Internet 
 platforms.  Commenters  and  petitioners  do  not  offer  evidence  that  Time  Warner  and  Comcast  are  likely  to  discriminate  against  Internet  content,  services,  or  applications  after  the  proposed  transactions  are 
 complete;  nor  do  they  explain  how  the  changes  in  ownership  resulting  from  the  transactions  could  increase  Time  Warners  or  Comcasts  incentive  to  do  so.  If  in  the  future  evidence  arises  that  any 
 company  is  willfully  blocking  or  degrading  Internet  content,  affected  parties  may  file  a  complaint  with  the  Commission.  677 


 221.  Moreover,  the  AOL-  Time  Warner  transaction    the  source  of  some  remedies  proposed  by  commenters    is  inapposite  here.  In  the  AOL-  Time  Warner  Order,  the  Commission  supplemented  a 
 condition  imposed  by  the  FTC  that  required  AOL  Time  Warner  to  give  unaffiliated  ISPs  open  access  to  its  cable  systems.  678  The  Commissions  condition  required  that  if  AOL  Time  Warner  provided  such 
 unaffiliated  open  access  voluntarily  or  otherwise,  it  must  do  so  on  nondiscriminatory  terms.  679  The  nondiscrimination  provision  was  premised  on  the  Commissions  view  that  Time  Warner  might  leverage 
 AOLs  dominance  in  the  narrowband  ISP  market  into  dominance  of  the  high-  speed  Internet  access  market.  680  As  a  consequence,  the  Commission  feared  that  unaffiliated  ISPs  would  be  unable,  or  less 
 likely,  to  gain  nondiscriminatory  access  to  Time  Warners  systems  for  the  purpose  of  offering  service  to  Time  Warners  subscribers  over  its  cable  facilities.  681 


 222.  In  these  transactions,  however,  the  systems  Comcast  acquires  from  Time  Warner  will  cease  to  be  vertically  integrated  with  AOL,  and  the  Adelphia  systems  acquired  by  Comcast  will  remain 
 unintegrated  with  AOL.  Therefore,  the  underlying  basis  for  imposing  a  nondiscrimination  condition  on  Comcast  is  absent  here.  682 


 223.  The  Commission  also  has  recently  adopted  a  Policy  Statement  on  broadband  access  to  the  Internet.  683  This  statement  reflects  the  Commissions  view  that  it  has  the  jurisdiction  necessary  to  ensure 
 that  providers  of  telecommunications  for  Internet  access  or  Internet  Protocol-  enabled  (IP-  enabled)  services  are  operated  in  a  neutral  manner.  To  ensure  that  broadband  networks  are  widely  deployed,  open, 
 affordable,  and  accessible,  the  Commission  adopted  four  principles  embodied  in  that  Policy  Statement: 
 (1)  consumers  are  entitled  to  access  the  lawful  Internet  content  of  their  choice;  (2)  consumers  are  entitled  to  run  applications  and  use  services  of  their  choice,  subject  to 


 676  See,  e.  g.,  White  Buffalo  Ventures,  LLC  v.  Univ.  of  Texas  at  Austin,  420  F.  3d  366  (5  th  Cir.  2005);  Sotelo  v. 
 Directrevenue,  LLC,  384  F.  Supp.  2d  1219  (N.  D.  Ill.  2005)  (citing  Compuserve,  Inc.  v.  Cyber  Promotions,  Inc.,  962  F.  Supp.  1015  (S.  D.  Ohio  1997)). 


 677  See  Madison  River  Communications  and  Affiliated  Companies,  20  FCC  Rcd  4295  (2005). 
 678  See  America  Online,  Inc.  and  Time  Warner  Inc.,  FTC  Docket  No.  C-  3989,  Agreement  Containing  Consent 
 Orders:  Decision  and  Order,  2000  WL  1843019  at  Section  III  (FTC  Dec.  14,  2000).  The  FTC  decision  and  order  containing  its  open  access  condition  terminated  on  April  17,  2006.  See  also  FTC  Decision  and  Order  (Final),  2001 


 WL  410712  at  Section  X  (April  17,  2001).  679 
 AOL-  Time  Warner  Order,  16  FCC  Rcd  at  6600-  03    126-  27.  680 
 Id.  at  6570-  71    61.  681 
 Id.  682 
 We  note  that  the  Commissions  AOL-  Time  Warner  non-  discrimination  condition  continues  to  apply  to  Time  Warners  systems,  including  systems  it  will  acquire  from  Adelphia  or  Comcast.  Id.  at  6600-  03    126-  27. 


 683  Appropriate  Framework  for  Broadband  Access  to  the  Internet  over  Wireline  Facilities,  Policy  Statement,  CC 
 Docket  No.  02-  33,  FCC  05-  151  (rel.  Sept.  23,  2005). 
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 the  needs  of  law  enforcement;  (3)  consumers  are  entitled  to  connect  their  choice  of  legal  devices  that  do  not  harm  the  network;  and  (4)  consumers  are  entitled  to 
 competition  among  network  providers,  application  and  service  providers,  and  content  providers.  684 


 The  Commission  held  out  the  possibility  of  codifying  the  Policy  Statements  principles  where  circumstances  warrant  in  order  to  foster  the  creation,  adoption,  and  use  of  Internet  broadband  content, 
 applications,  services,  and  attachments,  and  to  ensure  consumers  benefit  from  the  innovation  that  comes  from  competition.  Accordingly,  the  Commission  chose  not  to  adopt  rules  in  the  Policy  Statement.  685  This 
 statement  contains  principles  against  which  the  conduct  of  Comcast,  Time  Warner,  and  other  broadband  service  providers  can  be  measured.  Nothing  in  the  record  of  this  proceeding,  however,  demonstrates  that 
 these  principles  are  being  violated  by  Comcast  or  Time  Warner  or  that  the  transactions  before  us  create  economic  incentives  that  are  likely  to  lead  to  violations.  Additionally,  the  vigorous  growth  of 
 competition  in  the  high-  speed  Internet  access  market  further  reduces  the  chances  that  the  transactions  are  likely  to  lead  to  violations  of  the  principles. 


 E.  Equipment  and  Interactive  Television  Issues 
 224.  Free  Press  asserts  that,  post-  transaction,  Comcast  and  Time  Warner  would  exert  significant  influence  on  the  market  for  personal  video  recorders  (  PVRs)  and  other  consumer  electronic 


 devices,  such  as  wireless  routers  that  are  designed  to  be  attached  to  cable  or  residential  broadband  service.  686  Free  Press  contends  that,  with  control  of  more  than  40%  of  the  national  cable  market,  Comcast 
 and  Time  Warner  would  effectively  be  allowed  to  set  the  standards  and  terms  under  which  manufacturers  would  be  allowed  to  attach  devices  to  cable  networks.  687  Consequently,  states  Free  Press,  competing 
 services  such  as  TiVo  would  be  at  a  considerable  disadvantage  unless  they  acquiesce  to  the  demands  of  Comcast  and  Time  Warner  regarding  content  control,  price,  or  associated  services.  688 


 225.  Free  Press  also  raises  a  number  of  concerns  regarding  interests  Comcast  and  Time  Warner  would  acquire  in  companies  that  develop  electronic  program  guides  (  EPGs)  and  interactive 
 television  (  ITV)  software.  689  As  a  result  of  the  transactions,  Time  Warner  would  acquire  Adelphias  interest  in  ICTV,  a  privately-  held  interactive  TV  software  provider.  690  Pursuant  to  the  transactions, 
 Comcast  would  acquire  Adelphias  existing  interest  in  Sedna  Patent  Services,  a  developer  of  EPGs,  increasing  its  ownership  interest  to  47.49%.  Free  Press  notes  that  Comcast  currently  holds  and  is 


 684  Id.  at    4.  The  Commission  found  that  the  principles  adopted  in  the  Policy  Statement  are  subject  to  reasonable 
 network  management.  Id.  at    5  n.  15.  685 
 Id.  at    5.  686 
 Free  Press  Petition  at  15.  687 
 Id.  688 
 Id.  689 
 EPGs  are  on-  screen  directories  of  programming  delivered  through  various  means,  including  cable,  satellite,  and  over-  the-  air  broadcast  signals.  EPGs  are  available  in  two  formats,  original-  generation  or  interactive.  Original-generation 


 EPGs  continually  scroll  programming  listings  and  are  generally  delivered  as  discrete  programming  channels.  Interactive  EPGs  (  IPGs)  allow  users  to  sort  and  search  programming,  give  program  descriptions, 
 provide  reminders  of  upcoming  programming,  and  take  users  to  programming  they  select.  EPGs  are  available  to  cable  and  DBS  subscribers.  See  Report  on  the  Packaging  and  Sale  of  Video  Programming  Services  to  the  Public, 
 FCC  Media  Bureau,  Nov.  18,  2004,  http://  hraunfoss.  fcc.  gov/  edocs_  public/  attachmatch/  DOC-  254432A1.  pdf  (last  visited  June  20,  2006).  Generally,  ITV  is  defined  as  a  service  that  supports  subscriber-  initiated  choices  or  actions 
 that  are  related  to  one  or  more  video  programming  streams.  Nondiscrimination  in  the  Distribution  of  Interactive  Television  Services  Over  Cable,  16  FCC  Rcd  1321,  1323    6  (2001). 


 690  Public  Interest  Statement  at  7  n.  14. 
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 increasing  its  financial  interests  in  interactive  TV  entities  that  provide  advanced  services  such  as  EPGs,  PVRs,  VOD,  interactive  advertising,  enhanced  programming,  portals,  and  games.  691  Free  Press  alleges 
 that  the  combination  of  these  assets  with  the  enhanced  regional  and  national  market  power  Comcast  and  Time  Warner  would  have  post-  transaction  will  give  them  the  ability  to  dominate  the  ITV  market  through 
 anticompetitive  practices.  692  Based  on  these  assertions,  Free  Press  seeks  conditions  on  the  grant  of  the  Application  that  would  constrain  Applicants  and  their  iN  DEMAND  partnership  from  imposing 
 exclusivity  or  equity  as  a  condition  of  providing  games  or  other  interactive  services.  693 
 226.  Applicants  state,  in  response,  that  Free  Press  fundamentally  misunderstands  the  process  utilized  by  the  cable  industry  to  set  standards  for  cable-  ready  devices,  cable  modems,  and  other  cable-related 


 equipment.  694  Applicants  explain  that  Cable  Television  Laboratories,  Inc.,  a  cable  industry  non-profit  research  and  development  consortium,  develops  industry  specifications  that  are  subjected  to  public 
 comment  and  review  by  expert  industry  organizations.  695  Applicants  contend  that  Free  Press  has  failed  to  explain  how  or  why  Comcast  or  Time  Warner  would  be  able  to  alter  this  established  process  as  a  result  of 
 the  transactions.  696  Moreover,  Applicants  state  that  the  current  marketplace  for  cable-  ready  equipment  is  thriving,  with  many  consumer  electronics  manufacturers  able  to  offer  two-  way  cable-  ready  products, 
 including  interactive  program  guides,  video  on-  demand,  and  other  two-  way  cable  services  without  the  need  for  a  set-  top  box.  697  Additionally,  Applicants  state  that  Free  Press  is  incorrect  in  asserting  that 
 competing  services  such  as  TiVo  would  be  at  a  considerable  disadvantage  unless  they  acquiesce  to  the  demands  of  Comcast  and  Time  Warner  regarding  content  control,  price,  or  associated  services.  They 
 maintain  that  TiVo  has  continued  to  expand  with  new  product  offerings,  and  that  in  late  2006,  Comcast  and  TiVo  plan  to  introduce  a  new  set-  top  device  with  TiVo  user  interface.  698  Finally,  Applicants  counter 
 that  Free  Press  has  failed  to  provide  any  evidence  that  Comcast  or  Time  Warner  will  possess  market  power  with  respect  to  ITV  products  such  as  VOD,  DVRs,  and  EPGs  post-  transactions.  699  They  add  that 
 financial  investments  by  Comcast  and  Time  Warner  in  ITV-  related  entities  represent  minor  investments  and  that  many  companies  are  investing  in  the  competitive  and  dynamic  ITV  products  market.  700 


 227.  Discussion.  We  conclude  that  the  claims  of  harms  to  the  equipment,  EPG,  and  ITV  markets  are  speculative  and  not  specific  to  the  transactions  under  review.  We  do  not  find  sufficient 


 691  Free  Press  Petition  at  17-  19.  Free  Press  states  that  Comcast  has  positioned  itself  in  the  ITV  market  through  its 
 control  and/  or  interests  in  companies  such  as  Double  C  Technologies,  TV  Works,  Meta  TV,  Extent  Technologies,  and  Visible  World.  These  companies  are  involved  in  various  aspects  of  VOD,  targeted  interactive  advertising,  and 


 games  software.  Id.  692 
 Id.  at  19.  693 
 Id.  at  43.  694 
 See  Letter  from  Michael  H.  Hammer,  Willkie  Farr  &  Gallagher,  LLP,  Counsel  for  Adelphia  Communications  Corp.,  James  R.  Coltharp,  Comcast  Corp.,  and  Steven  N.  Teplitz,  Time  Warner  Inc.,  to  Marlene  H.  Dortch, 


 Secretary,  FCC  (Jan.  17,  2006)  (  Applicants  Jan.  17,  2006  Ex  Parte)  at  4.  695 
 Applicants  refer  to  traditional  standards  bodies  such  as  the  American  National  Standards  Institute.  See  id.  at  4.  696 
 Id.  697 
 Id.  at  2.  698 
 Id.  at  3.  699 
 Id.  at  6-  7.  MAP  responds  that  the  Applicants  January  17,  2006  Ex  Parte  does  not  address  the  core  issues  raised  by  Free  Press.  MAP  asserts  that,  post-  transaction,  Comcast  and  Time  Warner  will  have  the  power  and  the 


 incentive  to  set  de  facto  standards  in  the  market  for  consumer  electronic  devices.  It  states  that  by  dictating  standards  and  practices  to  the  electronics  industry,  Comcast  and  Time  Warner  will  be  able  to  create  incompatibilities  in  PVRs 
 and  other  consumer  video  devices,  which  will  increase  customer  lock  in.  See  MAP  Feb.  23,  2006  Ex  Parte  at  1-  2.  700 
 Applicants  Jan.  17,  2006  Ex  Parte  at  8. 
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 record  evidence  to  support  the  arguments  raised  by  Free  Press  that  the  transactions  would  create  the  incentive  for  Applicants  to  impede  technological  developments  in  the  emerging  ITV  market.  Time 
 Warners  assumption  of  an  equity  interest  in  ICTV  is  not  evidence  of  the  incentive  or  ability  to  dominate  the  ITV  market,  as  Free  Press  speculates.  ICTV  is  not  a  major  ITV  software  provider  and  is  not  in  a 
 position  to  control  software  development  in  this  emerging  industry.  701  Moreover,  Applicants  have  affirmatively  stated  that  ICTV  is  not  currently  a  major  ITV  software  provider  likely  to  dominate  in  this 
 developing  market.  Likewise,  we  are  not  persuaded  that  Comcasts  financial  interests  in  entities  that  develop  consumer  equipment,  EPG,  and  ITV  software  present  a  transaction-  specific  harm.  Specifically, 
 Comcasts  acquisition  of  Adelphias  2.11%  interest  in  Sedna  represents  only  a  modest  increase  in  Comcasts  existing  ownership  interest.  The  Commission  will  continue  to  monitor  developments  in  the 
 equipment  and  ITV  sectors. 
 F.  Impact  on  Employment  Practices 
 228.  NHMC  states  that  Comcast  has  made  scant  progress  in  its  hiring  of  Hispanic  employees  and  that,  despite  having  50%  turnover  in  the  last  three  years,  Comcast  has  chosen  not  to  add  a 


 Hispanic  representative  to  its  board  of  directors.  702  NHMC  notes  that  Hispanic  employment  at  Comcast  lags  behind  the  national  average  and  that,  as  of  2002,  only  3%  of  Comcasts  officials  and  managers  were 
 Hispanic.  703  Accordingly,  NHMC  requests  that  the  Commission  adopt  conditions  requiring  Comcast  to  submit  quarterly  reports  on  its  national,  regional,  and  local  recruitment  and  employment  of  minorities  and 
 to  increase  its  employment  of  minorities  in  decision-  making  positions  over  time.  704 
 229.  Applicants  state  that  no  commenter  has  presented  any  facts  that  would  justify  a  wholly  unprecedented  intervention  by  the  Commission  into  the  details  of  the  employment  relationship  between 


 Comcast  and  its  workers.  Applicants  contend  that  Comcast  provides  equal  opportunities  in  employment  and  is  succeeding  in  its  efforts  to  establish  a  diverse  workforce.  705  Applicants  also  describe  several 
 Comcast  initiatives  that  highlight  its  commitment  to  minority  hiring  and  its  compliance  with  the  Commissions  Equal  Employment  Opportunity  (EEO)  Rules.  706  Applicants  reject  the  claim  that 
 Comcasts  employment  of  Hispanics  lags  when  compared  to  national  statistics.  707  Applicants  assert  that 


 701  The  Applicants  have  made  similar  representations  regarding  ICTVs  dominance  in  the  ITV  market.  Time 
 Warner  ex  parte  meeting  with  FCC  staff,  Benefits  Presentation,  Nov.  9,  2005;  see  also  Applicants  Jan.  17,  2006  Ex  Parte  at  7-  8. 


 702  NHMC  Petition  at  5. 
 703  Id. 
 704  Id.  at  2. 
 705  Applicants  Reply  at  112.  The  Applicants  report  that  by  the  end  of  2004,  approximately  40%  of  all  Comcast 
 employees  were  minorities,  and  37%  were  women;  of  Comcasts  senior  managers  (employed  as  directors  and  in  higher  job  positions)  14%  were  minorities  and  30%  were  women.  The  Applicants  note  that  more  than  40%  of 


 Comcast  Cable  employees  promoted  within  the  last  two  years  were  minorities,  and  approximately  30%  were  women.  Id. 


 706  The  Applicants  list  four  such  initiatives.  First,  according  to  the  Applicants,  Comcast  has  established  a  Diversity 
 Management  Council,  comprised  of  senior  executives  representing  Comcasts  business  units,  which  is  charged  with  setting  tangible  goals  to  achieve  the  companys  diversity  objectives  within  each  of  its  operating  divisions.  Second, 


 the  Applicants  state  that  Comcast  actively  participates  in  hundreds  of  career  events  annually  and  is  continually  focused  on  community  events  to  recruit  minorities  for  employment.  Third,  Comcast  has  established  its  Comcast 
 University  program  to  develop  future  leaders  and  assist  new  entrants  in  the  cable  industry.  Fourth,  Comcast  states  that  it  is  partnering  with  organizations  that  specialize  in  connecting  Hispanic  professionals  with  corporate 
 employment  opportunities.  Id.  at  112-  14.  707 
 Id.  at  114  (employment  of  Hispanics  increased  by  250%  since  Comcasts  purchase  in  2002  of  AT&  T  Broadband).  According  to  the  Commissions  most  recent  statistics  compiled  in  its  1999  Cable  Employment  Trend 


 (continued.) 
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 imposition  of  quarterly  reporting  conditions  to  monitor  Comcasts  minority  recruiting  efforts  would  be  unreasonable  and  unnecessary.  708  Finally,  Applicants  assert  that  Comcast  is  complying  with  all  of  the 
 Commissions  EEO  rules  for  MVPDs,  including  the  reporting  requirements,  and  that  NHMC  has  failed  to  demonstrate  why  more  should  be  required  of  Comcast. 


 230.  Discussion.  The  Commission  has  administered  regulations  governing  the  EEO  responsibilities  of  cable  television  operators  since  1972.  709  These  regulations  prohibit  discrimination  in 
 hiring  on  the  basis  of  race,  color,  religion,  national  origin,  age,  or  gender.  710  Moreover,  they  require  cable  operators  and  other  MVPDs  to  reach  out  in  recruiting  new  employees  to  ensure  that  all  qualified 
 individuals  have  an  opportunity  to  apply  for  job  vacancies,  711  a  requirement  the  Commission  has  held  to  mean  that  MVPDs  must  widely  disseminate  information  concerning  all  job  vacancies.  712  Specifically,  the 
 Commissions  EEO  outreach  rules  have  three  prongs  that  MVPDs  must  satisfy:  (1)  they  must  widely  disseminate  information  concerning  each  full  time  job  vacancy,  except  for  vacancies  filled  in  exigent 
 circumstances;  (2)  they  must  provide  notice  of  each  full-  time  job  vacancy  to  recruitment  organizations  that  have  requested  such  notice;  and  (3)  they  must,  depending  on  the  staff  size  and  market  size  of  the 
 MVPD  employment  unit,  complete  either  one  or  two  longer-  term  recruitment  initiatives  each  year  (e.  g.,  mentoring  programs,  scholarships,  or  internships).  713 


 231.  NHMC  fails  to  raise  a  substantial  and  material  question  of  fact  regarding  Comcasts  compliance  with  the  Commissions  cable  EEO  outreach  rules.  The  petition  to  deny  presents  no  specific 
 evidence  regarding  Comcasts  alleged  failure  to  make  progress  in  its  hiring  of  Hispanic  employees.  NHMC  does  not  assert  that  Comcast  has  neglected  to  disseminate  widely  its  employment  vacancy 
 information  to  attract  qualified  applicants.  Nor  does  it  assert  that  Comcast  has  failed  to  send  vacancy  notices  to  organizations  that  have  requested  such  information  or  that  it  has  failed  to  initiate  and  complete 
 longer-  term  outreach  measures  as  required  by  the  Commissions  rules.  Comcast  has  described  several  measures  that,  generally,  appear  to  indicate  compliance  with  the  EEO  rules.  It  participates  annually  in  job 
 fairs  to  disseminate  information  about  employment  opportunities  at  Comcast;  it  works  with  organizations  that  can  assist  it  in  reaching  Hispanic  professionals  seeking  employment;  and  it  has  established  the 
 Comcast  University  as  a  longer  term  initiative  to  provide  training  and  instructional  support  to  Comcast  employees  seeking  management  and  promotional  opportunities  at  the  company.  Based  on  the  record 


 (Continued  from  previous  page)  Report,  10.5%  of  cable  employees  were  Hispanic.  See  FCC  Cable  Employment  Trend  Report  (1999), 
 http://  www.  fcc.  gov/  Bureaus/  Cable/  Public_  Notices/  2001/  pncb0101.  pdf  (last  visited  June  20,  2006).  708 
 Applicants  Reply  at  114.  709 
 See  Amendment  of  the  Commission's  Rules  to  Require  Operators  of  Community  Antenna  Television  Systems  and  Community  Antenna  Relay  Station  Licensees  to  Show  Nondiscrimination  in  their  Employment  Practices,  34 


 F.  C.  C.  2d  186  (1972).  710 
 47  C.  F.  R.    76.73(  a).  711 
 See  47  C.  F.  R.    76.  71,  76.  73,  76.  75,  76.  77,  and  76.  79.  712 
 Generally,  it  is  left  to  the  discretion  of  MVPDs  to  determine  how  this  requirement  is  best  fulfilled  so  long  as  the  procedures  utilized  are  sufficient  to  ensure  wide  dissemination  of  information  about  all  job  openings  to  the  entire 


 community.  See  Review  of  the  Commissions  Broadcast  and  Cable  Equal  Employment  Opportunity  Rules  and  Policies,  17  FCC  Rcd  24018  (2002)  (  Broadcast  and  Cable  Equal  Employment  Opportunity  Rules).  In  issuing  new 
 recruitment  outreach  rules,  the  Commission  deferred  action  on  issues  raised  concerning  the  broadcast  and  cable  annual  employment  report  forms  (FCC  Forms  395-  B,  395-  A),  which  had  been  used  to  collect  data  concerning  the 
 workforces  of  broadcast  and  cable  employment  units,  including  data  concerning  the  race/  ethnicity  and  gender  of  those  workforces.  In  Review  of  the  Commissions  Broadcast  and  Cable  Equal  Employment  Opportunity  Rules  and 
 Policies,  19  FCC  Rcd  9973  (2004),  the  Commission  reinstated  the  regulatory  requirements  to  file  the  forms  but  issued  a  notice  of  proposed  rulemaking  regarding  whether  the  forms  should  be  treated  as  confidential  by  the 
 Commission  after  they  are  filed.  713 
 Broadcast  and  Cable  Equal  Employment  Opportunity  Rules,  17  FCC  Rcd  at  24023-  24    14,  15. 
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 before  us,  we  can  discern  no  reason  to  impose  reporting  conditions  to  monitor  Comcasts  outreach  and  recruiting  efforts.  714  Thus,  we  deny  NHMCs  request  for  reporting  conditions  or  any  other  conditions 
 relevant  to  its  EEO  rule  compliance. 
 G.  Character  Qualifications 
 232.  Two  commenters  allege  that  Comcast  does  not  possess  the  requisite  character  qualifications,  as  required  under  section  310(  d)  of  the  Act,  to  hold  the  Adelphia  licenses.  715  CWA 


 challenges  Comcasts  character  qualifications  based  on  alleged  violations  of  the  National  Labor  Relations  Act  (  NLRA).  CWA  charges  that  Comcast  has  engaged  in  a  concerted  campaign  to  deny  its  employees 
 their  legal  rights,  under  the  NLRA,  to  union  representation  and  collective  bargaining  for  wages,  benefits,  and  working  conditions.  716  According  to  CWA,  statements  have  been  made  to  employees  at  various 
 Comcast  systems  that  employees  at  the  transferred  cable  systems  will  have  no  guarantee  of  employment  after  the  transfer.  717  CWA  asserts  that  the  provision  of  quality  telecommunications  service  requires  a 
 skilled,  experienced,  and  well-  trained  workforce  and  that  the  Commission  should  adopt  several  conditions  to  ensure  such  a  workforce  is  preserved  if  it  approves  the  transactions.  CWA  urges  the  Commission  to 
 impose  a  condition  to  ensure  that  employees  will  not  be  asked  or  forced  to  reapply  for  their  jobs  and  that  workers  in  transferred  franchises  will  not  lose  their  jobs  as  a  result  of  ownership  changes.  718  In  addition, 
 CWA  asks  that  we  require  the  new  employer  to  respect  and  recognize  the  collective  bargaining  status  of  its  employees  that  existed  prior  to  the  transfer,  retain  current  compensation  for  transferred  employees 
 based  on  the  transactions,  and  permit  transferred  workers  to  participate  in  Comcast  and  Time  Warner  benefit  programs.  Finally,  CWA  asserts  that  Comcast  and  Time  Warner  should  be  required  to  recognize 
 the  existing  contracts  of  employees  with  collective  bargaining  agreements  and  abide  by  the  spirit  of  the  law.  719 


 233.  TCR  maintains  that,  in  reviewing  the  character  qualifications  of  an  applicant  or  licensee,  the  Commission  should  determine  whether  the  applicant  has  violated  antitrust  or  other  laws  protecting 
 competition.  TCR  alleges  that  Comcast  is  using  its  market  power  to  discriminate  and  act  in  an  anti-competitive  manner  by  refusing  to  negotiate  with  TCR  and  discriminating  in  favor  of  its  affiliated 


 714  NHMC  is  not  foreclosed  from  filing  future  complaints  regarding  Comcasts  EEO  compliance.  Our  ruling  herein 
 is  limited  to  the  current  record  before  us.  715 
 See  47  U.  S.  C.    310(  d).  716 
 CWA/  IBEW  Petition  at  20.  CWA/  IBEW  cite  instances  in  which  Comcast  has  apparently  been  cited  by  the  National  Labor  Relations  Board  (  NLRB)  for  violations  of  labor  law.  Id.  at  20-  22.  CWA/  IBEW  also  allege  that 


 Comcast  has  reneged  on  promises,  made  when  it  purchased  AT&  Ts  cable  systems,  to  respect  the  collective  bargaining  agreements  negotiated  between  AT&  T  Broadband  and  union  members.  CWA/  IBEW  therefore  argue 
 that  their  union  members  will  be  harmed  by  the  transactions  because  they  currently  have  long-  standing  collective  bargaining  relationships  with  Adelphia  in  several  communities  in  which  Time  Warner  or  Comcast  propose  to 
 purchase  the  franchise.  Id.  at  22-  23.  717 
 CWA/  IBEW  state  that  the  only  protection  employees  have  had  through  the  lengthy  ordeal  of  the  Rigas  family  indictments  and  bankruptcy  is  their  union  contract.  CWA/  IBEW  Petition  at  23. 


 718  Id. 
 719  Id.  at  24.  See  CWA  Dec.  16,  2005  Ex  Parte;  see  also  Letter  from  Kenneth  R.  Peres,  Ph.  D.,  CWA,  to  Marlene  H. 
 Dortch,  Secretary,  FCC  (Feb.  23,  2006);  Letter  from  Kenneth  R.  Peres,  Ph.  D.,  CWA,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Feb.  27,  2006);  Letter  from  Kenneth  R.  Peres,  Ph.  D.,  CWA,  to  Marlene  H.  Dortch,  Secretary,  FCC 


 (Mar.  22,  2006)  (seeking  the  requirement  that  Time  Warner  and  Comcast  commit  in  writing  that  they  will  (1)  continue  a  bargaining  relationship  with  those  units  that  are  represented  by  a  union,  and  (2)  permit  transferred 
 workers  eligibility  for  company  benefit  plans,  and  not  reduce  compensation  as  a  result  of  the  transaction);  CWA  Presentation  to  FCC  (Mar.  31,  2006)  at  12  (alleging  that  Time  Warner  informed  all  Adelphia  employees  by  letter  of 
 February  17,  2006,  that  their  employment  with  TWC  would  be  at-  will,  and  not  governed  by  any  individual  contract  or  collective  bargaining  agreement). 
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 RSNs.  720  TCR  has  formally  raised  its  concerns  regarding  Comcasts  refusal  to  carry  its  regional  sports  networks,  MASN,  with  the  Commission  in  a  program  carriage  complaint.  721 
 234.  Responding  to  CWA,  Comcast  asserts  that  it  respects  workers  rights  to  organize  and  adds  that  the  company  will  continue  to  abide  by  relevant  labor  laws  and  the  current  or  future  terms  of 
 bargaining  unit  agreements  it  has  with  IBEW  and  CWA.  722  Comcast  pledges  to  respect  existing  contracts  with  Adelphia  employees  following  the  proposed  transactions.  723  In  its  view,  employees 
 should  have  the  freedom  to  choose  whether  to  work  in  a  union  environment,  and  as  a  result  of  its  corporate  policies,  including  benefits,  wages,  and  job  enrichment  programs,  Comcast  employees 
 frequently  opt  against  unionizing.  724 
 235.  Applicants  contend  that  the  Commission  should  not  act  on  allegations  raising  labor  law  issues,  as  such  allegations  are  better  left  to  the  NLRB,  which  is  tasked  with  resolving  claims  of  unfair 


 labor  practices.  They  state  that  the  matters  in  litigation  before  the  NLRB  do  not  form  a  basis  for  a  character  qualifications  issue  and  that  the  cited  cases  are  isolated  incidents  that  do  not  reflect  Comcasts 
 general  corporate  policy  and  practices.  725  Applicants  assert  that  many  of  the  incidences  raised  by  CWA  in  its  comments  have  already  been  adjudicated,  and,  in  most  instances,  decisions  were  rendered  in 
 Comcasts  favor.  726  Accordingly,  Applicants  urge  the  Commission  to  deny  the  requests  to  impose  labor-oriented  conditions.  727 


 236.  Comcast  asserts  that  TCR  ignores  longstanding  Commission  precedent  that  merger  transactions  are  not  the  appropriate  fora  for  disposition  of  complaint  proceedings.  728  Comcast  states  that 
 inasmuch  as  TCRs  carriage  complaint  mirrors  its  arguments  and  request  for  conditions  in  the  instant  matter,  consideration  of  those  carriage  issues  in  this  proceeding  would  be  duplicative.  729  Nonetheless, 


 720  TCR  Petition  at  17.  See  also  Letter  from  David  C.  Frederick,  Kellogg,  Huber,  Hansen,  Todd,  Evans  &  Figel, 
 P.  L.  L.  C.,  Counsel  for  TCR,  to  Marlene  H.  Dortch,  Secretary,  FCC  (May  16,  2006).  721 
 TCR  Sports  Broadcasting  Holding,  L.  L.  P.  v.  Comcast  Corp.,  CSR-  6911-  N  (filed  June  14,  2005)  (  TCR  Complaint).  The  complaint,  which  alleges  violations  of  Commission  rules  47  C.  F.  R.    76.  1300-  76.  1302,  is 


 currently  pending  with  the  Media  Bureau.  722 
 Applicants  Reply  at  117.  723 
 Id.  724 
 Id.  at  118.  725 
 Id.  at  117.  726 
 Id.  at  117-  118  n.  375.  727 
 The  Applicants  further  contend  that  several  of  CWAs  assertions,  made  in  ex  parte  presentations  to  Commission  staff,  are  unfounded.  Specifically,  the  Applicants  deny  CWAs  charge  that  Comcast  and  Time  Warner  will 


 discriminate  against  union  employees,  or  that  the  Asset  Purchase  Agreement  between  the  parties  requires  employees  to  reapply  for  their  jobs.  The  Applicants  assert  that  all  applicable  employees  of  the  acquired  systems 
 will  be  offered  employment  and  that  there  is  no  requirement  that  employees  reapply  for  their  jobs.  See  Letter  from  Seth  A.  Davidson,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary, 
 FCC  (Feb.  28,  2006).  Additionally,  in  response  to  subsequent  notices  of  ex  parte  meetings  between  CWA  and  Commission  staff,  the  Applicants  state  that  with  respect  to  labor  relations,  the  NLRB  is  the  appropriate  federal 
 agency  to  review  those  issues.  They  add  that  there  is  no  precedent  for  CWAs  demand  that  the  Commission  delve  into  matters  of  federal  labor  law  by  requiring  Time  Warner  and  Comcast  to  continue  a  bargaining  relationship  with 
 those  units  that  are  represented  by  a  union.  See  Letter  from  Seth  A.  Davidson,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  28,  2006). 


 728  See  Letter  from  James  R.  Coltharp,  Comcast  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Jan.  10,  2006) 
 (  Comcast  Jan.  10,  2006  Ex  Parte)  at  1;  see  also  TCR  Complaint.  729 
 Comcast  Jan.  10,  2006  Ex  Parte  at  2. 
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 Comcast  contends  that  TCR  has  failed  to  prove  that  post-  transactions  Comcast  will  possess  sufficient  market  power  as  a  distributor  of  RSN  programming  in  the  Baltimore/  Washington  area  to  force  MASN  to 
 exit  the  market.  730 
 237.  Discussion.  Pursuant  to  statute,  the  Commission  evaluates  the  citizenship,  character,  financial,  technical,  and  other  qualifications  731  of  the  Applicants  when  conducting  its  analysis  of  a 


 proposed  transaction.  As  part  of  this  assessment,  the  Commission  examines  any  alleged  Commission-related  misconduct,  i.  e.,  violations  of  the  Communications  Act  or  the  Commissions  rules  and  policies,  732 
 as  well  as  other  behavior.  733  Generally,  the  Commission  considers  three  types  of  adjudicated  non-Commission  related  misconduct:  (1)  felony  convictions;  (2)  fraudulent  misrepresentations  to 
 governmental  units;  and  (3)  violations  of  antitrust  or  other  laws  protecting  competition.  734 
 238.  The  character  qualifications  allegations  raised  by  commenters  do  not  raise  a  substantial  and  material  question  of  fact  warranting  designation  for  hearing;  nor  have  commenters  justified 


 imposition  of  labor-  oriented  conditions.  Commenters  have  not  raised  issues  concerning  Commission-related  conduct  or  the  types  of  adjudicated  non-  Commission  misconduct  relevant  under  the  Character 
 Policy  Statement.  735 
 730  Id.  at  3.  On  May  23,  2006,  Mayor  Anthony  Williams  of  Washington,  D.  C.,  signed  into  law  a  bill  which  requires 
 Comcast  to  begin  broadcasting  Washington  Nationals  games  or  potentially  lose  its  franchise  license.  Comcast  is  the  main  cable  provider  in  Washington,  D.  C.  See  Williams  Signs  Bill  Requiring  Comcast  to  Show  Nats  Games, 


 WASHINGTON  POST,  May  24,  2006,  at  E-  2.  731 
 47  U.  S.  C.    308(  b),  310(  d).  See  Policy  Regarding  Character  Qualifications  in  Broadcast  Licensing,  102  F.  C.  C.  2d  1179    2  (1986),  modified,  5  FCC  Rcd  3252  (1990),  recon.  granted  in  part,  6  FCC  Rcd  3448  (1991), 


 modified  in  part,  7  FCC  Rcd  6564  (1992)  (  Character  Policy  Statement).  This  character  policy  statement  is  utilized  primarily  in  broadcast  licensing  and  application  proceedings  to  assess  fitness,  but  also  in  reviewing  initial, 
 assignment,  transfer,  and  license  renewal  applications  for  a  variety  of  services.  See  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20576    28;  Applications  for  the  Consent  to  Transfer  of  Control  of  Licenses  and  Section  214 
 Authorizations  from  Southern  New  England  Telecommunications  Corporation,  Transferor,  to  SBC  Communications,  Inc.,  Transferee,  13  FCC  Rcd  21292,  21305    26  (1998);  Western  Telecommunications,  Inc.,  3  FCC  Rcd  6405 
 (1988).  732 
 In  examining  FCC  misconduct,  the  Commission  has  determined  that  the  relevant  character  traits  with  which  it  is  concerned  are  those  of  truthfulness  and  reliability  as  a  means  to  discern  whether  the  licensee  will  in  the  future  be 


 likely  to  be  forthright  in  its  dealings  with  the  Commission  and  to  operate  its  station  consistent  with  the  requirements  of  the  Communications  Act  and  the  Commissions  rules  and  policies.  Character  Policy  Statement,  102  F.  C.  C.  2d  at 
 1209    55.  733 
 When  the  misconduct  involves  non-  FCC  behavior,  the  Commission  has  previously  focused  on  behavior  that  allows  us  to  predict  whether  an  applicant  has  or  lacks  the  character  traits  of  truthfulness  and  reliability  that  we 


 have  found  relevant  to  the  qualifications  to  operate  a  broadcast  station  in  accordance  with  the  requirements  of  the  Communications  Act  and  of  our  rules  and  policies.  Character  Policy  Statement,  102  F.  C.  C.  2d  at  1195    34. 


 734  See  Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  20092    236  (1998). 
 735  CWA,  in  ex  parte  presentations  to  Commission  staff,  has  indicated  that  the  Commissions  decision  in  the  SBC-Ameritech 
 Order  is  precedential.  We  disagree  that  the  SBC-  Ameritech  Order  provides  precedent  supporting  a  requirement  that  Comcast  and  Time  Warner  be  required  to  maintain  adequate  levels  of  trained  and  experienced 


 employees,  which  CWA  asserts  would  impact  customer  service.  In  that  transaction,  the  Commission  rejected  claims  that  the  transfers  should  be  prohibited  based  on  speculation  that  service  quality  in  the  Ameritech  region  would 
 deteriorate  as  a  result  of  the  merger.  As  the  assignee  in  that  case,  SBC  voluntarily  increased  its  commitment  to  improving  service  quality  by,  among  other  things,  hiring  more  employees  and  investing  in  infrastructure.  In 
 addition,  regulations  pertaining  to  the  Title  II  licenses  at  issue  in  that  transaction  provided  for  annual  reporting  via  the  Automated  Reporting  Management  Information  System  (  ARMIS).  Commitments  proffered  by  SBC  and 
 Ameritech  prompted  the  reporting  and  enforcement  measures  designed  to  prevent  potential  service  quality  degradation  post-  merger.  See  SBC-  Ameritech  Order,  14  FCC  Rcd  at  14946-  47    566-  67.  CWA  further  seeks  a 
 condition  that  the  Commission  monitor  the  buildout  of  advanced  services  in  rural  areas  to  assess  whether  potential  (continued.) 
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 239.  Further,  Comcast  has  stated  emphatically  that  it  will  abide  by  labor  laws,  as  well  as  current  and  future  bargaining  unit  agreements  with  CWA  and  IBEW.  736  In  addition,  Comcast  pledges  to 
 comply  with  current  contracts  with  Adelphia  employees  post-  transaction.  737  Time  Warner  states  that  there  is  no  requirement  that  Adelphia  employees  must  reapply  for  their  jobs,  and  that  it  intends  to 
 bargain  in  good  faith  with  the  bargaining  representative  at  any  locations  where  such  obligation  applies.  738  We  see  no  reason  not  to  accept  Comcasts  and  Time  Warners  good  faith  representations. 
 Moreover,  the  respective  LFAs  have  not  alleged  that  union  labor  or  other  employment  issues  at  local  cable  systems  have  resulted  in  poor  or  inadequate  customer  service  to  their  customers.  In  the  absence  of 
 such  concerns,  we  see  no  reason  to  impose  specific  conditions  regarding  bargaining  unit  employees. 
 240.  We  note  that  commenters  have  other,  more  appropriate,  avenues  for  obtaining  relief  regarding  these  non-  transaction  specific  issues.  Indeed,  it  appears  that  CWA  and  TCR  have  appropriately 


 resorted  to  other  fora  for  redress  of  their  disputes  with  Comcast.  We  note  CWAs  and  Comcasts  recitation  of  several  adjudicated  NLRB  decisions.  739  Further,  as  previously  noted,  TCR  has  filed  with  the 
 Commission  a  program  carriage  complaint  that  seeks  individualized  relief  from  Comcasts  alleged  refusal  to  carry  TCRs  regional  sports  networks.  The  Media  Bureau  will  address  TCRs  complaint  in  a  separate 
 proceeding. 
 VIII.  ANALYSIS  OF  PUBLIC  INTEREST  BENEFITS 
 241.  The  Applicants  state  that  the  main  benefit  of  the  transactions  is  that  they  will  result  in  faster  deployment  of  advanced  services  on  the  Adelphia  systems.  More  specifically,  the  Applicants 


 contend  that  the  proposed  transactions  would  produce  the  following  four  public  interest  benefits:  (1)  accelerated  deployment  of  advanced  digital  video  services,  VoIP  service,  and  high-  speed  Internet  service 
 to  former  Adelphia  subscribers;  (2)  enhanced  competition  and  pro-  consumer  efficiencies  achieved  through  increased  geographic  rationalization,  or  clustering  of  Applicants  respective  cable  systems;  (3) 
 the  resolution  of  Adelphias  bankruptcy  proceedings;  and  (4)  the  unwinding  of  Comcasts  interests  in  TWE  and  TWC. 


 242.  Although  we  reject  some  benefits  proffered  by  the  Applicants,  we  find  that  the  proposed  transactions  will  produce  public  interest  benefits.  First,  we  find  that  the  transactions  likely  will  accelerate 
 the  deployment  of  VoIP  service  and  advanced  video  services  in  former  Adelphia  service  areas.  Second, 
 (Continued  from  previous  page)  financial  strains  created  by  the  transactions  would  lead  to  negative  impacts  on  consumers  and  communities.  CWA 


 relies  on  the  Commissions  decision  in  Sprint-  Nextel  as  support  for  its  request  for  conditions.  Sprint-  Nextel  Order,  20  FCC  Rcd  at  14034-  35    183.  See  CWA  Dec.  16,  2005  Ex  Parte  at  2,  Att.  As  we  discuss,  infra,  the  record  in  the 
 instant  transactions  does  not  warrant  imposition  of  measures  to  ensure  service  quality  to  consumers  in  the  Adelphia  markets,  beyond  what  the  Applicants  have  asserted  they  intend  to  provide  in  upgrading  the  Adelphia  markets. 
 Specifically,  we  find  no  evidence  that  LFAs  have  raised,  on  this  record,  substantial  concerns  about  the  capability  of  Comcast  and  Time  Warner  to  serve  Adelphia  customers  in  the  same  manner  as  they  currently  serve  their  respective 
 customers.  Hence,  we  do  not  find  that  customer  service  in  those  markets  is  likely  to  suffer  as  a  result  of  the  transactions. 


 736  Applicants  Reply  at  117. 
 737  Id. 
 738  See  Time  Warner  Jan.  25,  2006  Ex  Parte  at  2.  See  also  Letter  from  Megan  Anne  Stull,  Willkie  Farr  &  Gallagher, 
 LLP,  Counsel  for  Adelphia  Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Apr.  19,  2006)  (summary  of  CWAs  labor  allegations  and  the  Applicants  rebuttals  thereto). 


 739  We  believe  that  NLRB  is  the  more  appropriate  forum  for  resolution  of  commenters  labor-  oriented  concerns.  See 
 supra  note  716  for  a  brief  discussion  of  cases  cited  by  CWA  involving  adverse  NLRB  decisions  against  Comcast.  Comcast  states  that  it  was  found  to  not  be  at  fault  in  the  firing  of  a  Beaver  Falls  worker  who  was  organizing  a  union; 


 that  the  NLRB  dismissed  a  claim  that  Comcast  influenced  a  union  decertification  election  in  Illinois;  and  that  Comcast  was  found  not  to  be  at  fault  in  the  firing  of  two  technicians  who  were  union  supporters  in  Pittsburgh. 
 Applicants  Reply  at  117-  18  n.  375. 
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 while  increased  clustering  may  result  in  certain  efficiencies  and  cost  savings,  we  find  that  Applicants  have  failed  to  sufficiently  quantify  the  cost  savings  or  adequately  explain  how  the  cost  savings  will  flow 
 through  to  consumers.  We  also  find  that  the  Applicants  have  not  demonstrated  that  increased  clustering  will  enhance  competition  with  DBS  providers  and  LECs  to  the  benefit  of  consumers.  Therefore,  we  do 
 not  give  weight  to  these  claims.  Third,  we  find  that  the  transactions  will  facilitate  the  resolution  of  Adelphias  bankruptcy  proceedings.  Finally,  we  conclude  that  the  unwinding  of  Comcasts  interests  in 
 TWE  and  TWC  is  not  a  cognizable  benefit,  because  it  effectuates  compliance  with  a  prior  Commission  order.  We  discuss  in  detail  our  findings  below. 


 A.  Analytical  Framework 
 243.  In  addition  to  assessing  the  potential  public  interest  harms  of  a  proposed  transaction,  the  Commission  also  evaluates  whether  the  transaction  is  likely  to  produce  direct  public  interest  benefits.  740 


 Then,  the  Commission  must  determine  whether  the  potential  public  interest  benefits  outweigh  the  potential  harms,  such  that  approval  of  the  associated  license  transfers  may  be  deemed  to  serve  the  public 
 interest.  741  For  example,  efficiencies  created  by  a  proposed  transaction  can  mitigate  anticompetitive  harms  if  they  enhance  a  firms  ability  and  incentive  to  compete  and  therefore  result  in  lower  prices, 
 improved  quality,  enhanced  service,  or  new  products.  742  Under  Commission  precedent,  the  Applicants  bear  the  burden  of  demonstrating  that  the  potential  public  interest  benefits  of  the  proposed  transactions 
 outweigh  the  potential  public  interest  harms.  743 
 244.  The  Commission  applies  several  criteria  in  deciding  whether  a  claimed  benefit  should  be  considered  and  weighed  against  potential  harms.  First,  the  claimed  benefit  must  be  transaction-  specific. 


 This  means  that  the  claimed  benefit  must  be  likely  to  be  accomplished  as  a  result  of  the  transaction  but  unlikely  to  be  realized  by  other  means  that  entail  fewer  anticompetitive  effects.  Second,  the  claimed 
 benefit  must  be  verifiable.  744  Because  much  of  the  information  relating  to  the  potential  benefit  of  a  transaction  is  in  the  sole  possession  of  the  Applicants,  they  are  required  to  provide  sufficient  supporting 
 evidence  so  that  the  Commission  can  verify  the  likelihood  and  magnitude  of  each  claimed  benefit.  745  Speculative  benefits  that  cannot  be  verified  will  be  discounted  or  dismissed.  746  Benefits  that  are  expected 
 to  occur  only  in  the  distant  future  are  inherently  more  speculative  than  benefits  that  are  expected  to  occur 


 740  For  instance,  we  consider  any  efficiencies  and  other  benefits  that  might  be  gained  through  increased  ownership 
 or  control.  47  U.  S.  C.    533(  f)(  2)(  D).  741 
 AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9883    154;  SBC-  Ameritech  Order,  14  FCC  Rcd  at  14736    46.  742 
 News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  610    316  (citing  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20630    188);  Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  20063    158;  Sprint-  Nextel  Order,  20  FCC  Rcd  at  14013    129; 


 see  also  Horizontal  Merger  Guidelines    4.  743 
 News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  610    316;  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20630    188;  Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  20063    157;  SBC-  Ameritech  Order,  14  FCC  Rcd  at  14825    256;  see 


 also  TAC  Petition  at  6.  744 
 News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  610    317;  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20630    189-90;  Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  20064    158;  SBC-  Ameritech  Order,  14  FCC  Rcd  at  14825    255; 


 Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23313    173.  745 
 News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  610    317;  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20630    190;  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23313    173;  see  also  Horizontal  Merger  Guidelines    4. 


 746  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  611    317;  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20630    190. 
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 more  immediately.  The  magnitude  of  benefits  is  calculated  net  of  the  cost  of  achieving  them.  747  Third,  benefits  must  flow  through  to  consumers.  748 
 245.  Finally,  the  Commission  applies  a  sliding  scale  approach  to  its  ultimate  evaluation  of  benefit  claims.  Under  this  sliding  scale  approach,  where  potential  harms  appear  both  substantial  and 
 likely,  the  Applicants  demonstration  of  claimed  benefits  also  must  reveal  a  higher  degree  of  magnitude  and  likelihood  than  the  Commission  would  otherwise  demand.  749 


 B.  Claimed  Benefits 
 1.  Deployment  of  Advanced  Services  on  Adelphias  Systems 
 246.  Comcast  and  Time  Warner  claim  that  they  would  upgrade  Adelphias  systems  to  enable  the  delivery  of  new  or  improved  advanced  services  and  to  speed  and  expand  the  rollout  of  advanced 


 services  that  already  have  been  introduced.  These  services  include  (1)  advanced  video  services  (digital  cable,  HDTV,  DVR,  VOD,  and  SVOD);  (2)  VoIP  service;  and  (3)  high-  speed  Internet  service.  750 


 247.  The  Applicants  claim  that  the  transactions  would  allow  Time  Warner  and  Comcast  to  bring  their  technological  leadership  to  Adelphias  cable  systems  and  that  their  track  records  for  upgrading 
 and  operating  broadband  networks  should  serve  as  proof  of  their  commitment  to  deliver  the  same  results  for  Adelphia  subscribers.  751  The  Applicants  provide  examples  of  their  past  accomplishments,  stating,  for 
 example,  that  Comcast  spent  nearly  $8  billion  to  upgrade  systems  it  acquired  from  AT&  T  Broadband  in  2002.  752  In  addition,  Comcast  asserts  that  it  exceeded  its  projected  timetable  for  the  upgrades  and 
 deployments  of  advanced  services  on  the  AT&  T  Broadband  systems.  753  Time  Warner  states  that  it  has  invested  $5  billion  since  1996  on  plant-  related  rebuilds  and  that  it  was  the  first  MSO  to  complete  a  digital 
 upgrade  of  all  of  its  cable  systems,  finishing  in  1991.  754 
 248.  Applicants  compare  Comcasts,  Time  Warners,  and  Adelphias  cable  systems,  penetration  rates,  and  services  in  order  to  demonstrate  Adelphias  sub-  par  performance.  For  instance, 


 they  note  that  Adelphia  lags  behind  Comcast  and  Time  Warner  in  the  provision  of  two-  way  service  offerings  and  in  penetration  levels  for  high-  speed  Internet,  VoIP  service,  and  advanced  video  services.  755 


 747  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  610-  11    317;  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20630-  31 
   190.  748 
 Application  of  Western  Wireless  Corp.  and  ALLTEL  Corp.  for  Consent  to  Transfer  Control  of  Licenses  and  Authorizations,  20  FCC  Rcd  13053,  13100    132  (2005)  (  ALLTEL-  WWC  Order). 


 749  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  611    318;  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20631    192 
 (citing  SBC-  Ameritech  Order,  14  FCC  Rcd  at  14825    256).  750 
 Public  Interest  Statement  at  46,  48.  751 
 Id.  at  21;  Applicants  Reply  at  8-  9.  752 
 Public  Interest  Statement  at  32-  33;  Applicants  Reply  at  App.  B.  753 
 Applicants  Reply  at  8-  9.  Comcast  states  that  it  completed  93%  of  the  upgrades  by  year-  end  2003.  Letter  from  Martha  E.  Heller,  Wiley  Rein  &  Fielding,  LLP,  Counsel  for  Comcast  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC 


 (Nov.  18,  2005)  (  Comcast  Nov.  18,  2005  Ex  Parte)  at  Att.  (  Advanced  Services  Benefits)  at  4.  754 
 Public  Interest  Statement  at  23-  24;  Applicants  Reply  at  9  (citing  Social  Contract  for  Time  Warner,  11  FCC  Rcd  2788  (1996)).  In  a  subsequent  filing,  Time  Warner  claims  to  have  spent  over  $17  billion  since  1996  upgrading, 


 enhancing,  and  growing  its  plant.  Time  Warner  Nov.  10,  2005  Ex  Parte  at  Decl.  of  Peter  Stern  at  1.  755 
 Public  Interest  Statement  at  45.  In  Adelphias  2004  year-  end  SEC  filing,  it  states  that  as  of  December  31,  2004,  86%  of  homes  passed  were  served  by  systems  with  750  MHz,  two-  way  capacity.  On  its  750  MHz  systems, 


 Adelphia  offers  HDTV,  VOD,  and  DVR  services.  Adelphias  basic  service  tier  penetration  rate  fell  to  47.  1%  from  50.5%  in  2003.  Of  its  basic  service  subscribers,  38.3%  also  subscribe  to  Adelphias  digital  service,  a  2.9%  increase 
 from  2003.  Adelphia  Communications  Corp.,  SEC  Form  10-  K  for  the  Year  Ended  December  31,  2004,  at  6-  7.  In  (continued.) 
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 According  to  Time  Warner,  approximately  15%  of  the  existing  Adelphia  plant  to  be  acquired  by  Time  Warner  has  not  been  upgraded  to  750  MHz.  Time  Warner  and  Comcast  claim  to  provide  services  to  over 
 99%  of  their  subscribers  on  cable  systems  with  750  MHz  capacity  and  two-  way  capabilities.  756  According  to  Applicants,  Adelphias  basic  cable  penetration  rate  of  48.1%  lags  behind  Comcasts  52.6% 
 and  Time  Warners  56.7%  penetration  rates.  757  Applicants  state  that  only  2.8%  of  Adelphias  basic  tier  subscribers  subscribe  to  HDTV  service,  while  6.7%  of  Comcasts  and  5.3%  of  Time  Warners  basic  tier 
 subscribers  subscribe  to  HDTV  service.  758  According  to  Applicants,  Adelphia  has  126,000  DVR  subscribers  compared  to  Comcasts  575,000  and  Time  Warners  998,000.  759  In  addition,  Applicants  state 
 that  Adelphia  offers  VOD  to  60%  of  its  subscribers,  compared  to  approximately  90%  and  100%  for  Comcast  and  Time  Warner,  respectively.  760 


 249.  Among  the  advanced  video  services  Comcast  and  Time  Warner  plan  to  offer  on  Adelphia  systems  is  local  VOD.  Comcasts  and  Time  Warners  local  VOD  offerings  include  content  such  as  high 
 school  and  college  sports;  educational  programs  and  special  events,  often  presented  in  partnership  with  schools  and  community  organizations;  PSAs;  local  news;  and  political  programming.  761  Currently,  Time 
 Warner  offers  local  VOD  programming  to  virtually  all  of  its  cable  divisions,  with  an  average  of  50  hours  of  local  content  per  week.  762  Adelphia  does  not  offer  local  VOD  content  to  its  subscribers  and  does  not 
 have  any  plans  to  initiate  such  service  in  the  near  future.  763 
 (Continued  from  previous  page)  comparison,  over  40%  of  Comcasts  and  over  45%  of  Time  Warners  basic  tier  subscribers  also  subscribe  to  digital 


 service.  Public  Interest  Statement  at  24,  34.  756 
 Time  Warner  Nov.  10,  2005  Ex  Parte,  Ex.  1  (  Benefits  Presentation)  at  12;  Public  Interest  Statement  at  33.  757 
 Public  Interest  Statement  at  45.  758 
 Id.  at  47.  Comcast  also  states  that  its  HDTV  service  is  available  to  over  90%  of  its  customers  and  boasts  nearly  1.5  million  subscribers.  Comcast  offers  up  to  15  HDTV  channels  of  national  programming  and  provides  HDTV 


 programming  on  each  of  its  regional  SportsNet  services.  Id.  at  34-  35.  Time  Warner  states  that  it  offers,  on  average,  15  HDTV  channels  and  has  nearly  574,  000  HDTV  subscribers.  Id.  at  25.  The  Applicants  do  not  provide 
 comparable  HDTV  statistics  for  Adelphias  cable  systems.  759 
 These  statistics  indicate  that  2.5%  of  Adelphias  subscribers  purchase  DVR  service,  while  2.6%  of  Comcasts  and  7.6%  of  Time  Warners  subscribers  respectively,  purchase  DVR  service. 


 760  Comcast  states  that  its  digital  subscribers  have  access  to  an  average  of  2,500-  3,000  hours  of  VOD  programming 
 per  month,  of  which  up  to  95%  is  free.  Comcast  Nov.  22,  2005  Ex  Parte  at  7.  By  year  end  2005,  Comcast  projected  it  would  be  offering  subscribers  a  choice  of  up  to  10,  000  programs.  Public  Interest  Statement  at  36;  Comcast  Nov. 


 18,  2005  Ex  Parte,  Att.  at  11.  Time  Warner  states  that  it  offers  VOD  to  customers  with  advanced  digital  set-  top  boxes  in  all  of  its  divisions.  In  2005,  the  company  had  1.6  million  SVOD  subscribers.  Time  Warner  states  that  it 
 introduced  an  integrated  DVR  in  2002  and  a  multi-  room  DVR  in  2004.  In  November  2005,  Time  Warner  introduced  its  Start  Over  service  on  its  South  Carolina  system,  which  allows  subscribers  to  view  broadcast 
 programs  any  time  after  the  show  begins.  Public  Interest  Statement  at  26-  27;  Time  Warner  Nov  10,  2005  Ex  Parte  at  2-  3  &  Ex.  1  (  Benefits  Presentation)  at  5,  8. 


 761  Letter  from  Martha  E.  Heller,  Wiley,  Rein  &  Fielding,  LLP,  Counsel  for  Comcast  Corp.,  to  Marlene  H.  Dortch, 
 Secretary,  FCC  (Nov.  15,  2005)  at  Att.  (  Local  Benefits)  at  12-  16;  Letter  from  Seth  A.  Davidson,  Fleischman  and  Walsh,  L.  L.  P.,  Counsel  for  Time  Warner  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Nov.  17,  2005)  at  Ex.  1 


 (  Local  on  Demand-  Southeast  Wisconsin)  at  2-  8.  Comcast  projected  it  would  be  offering  three-  quarters  of  its  customers  digital  simulcasting  by  the  end  of  2005.  It  also  intends  to  invest  [REDACTED]  to  launch  digital 
 simulcasting  on  Adelphias  systems.  Comcast  Nov.  18,  2005  Ex  Parte,  Att.  (  Advanced  Services  Benefits)  at  13.  762 
 Time  Warner  Nov.  10,  2005  Ex  Parte,  Ex.  1  (  Benefits  Presentation)  at  18  &  Decl.  of  Peter  Stern  at  2.  Comcast  did  not  provide  information  regarding  how  many  of  its  systems  offer  local  VOD  programming  or  the  average 


 numbers  of  hours  of  local  VOD  provided  where  it  is  offered,  but  the  company  did  provide  examples  of  local  VOD  programming.  On  its  Arlington,  Virginia  cable  system,  for  example,  Comcast  offers  NBC,  ABC,  and  NewsChannel 
 8  local  news  on  demand,  as  well  as  educational  programming  specials  such  as  In  their  Own  Words  (a  documentary  about  the  events  of  D-  Day  as  told  by  World  War  II  veterans  from  Maryland)  and  Students  and  Leaders  (2003)  (a 
 (continued.) 
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 250.  The  Applicants  also  claim  that  they  would  provide  Adelphia  subscribers  with  VoIP  service.  Comcast  states  that  it  currently  can  provide  its  VoIP  service,  Comcast  Digital  Voice,  to  19 
 million  households  in  30  markets  and  is  on  track  to  deploy  the  service  to  approximately  32  million  homes  by  the  end  of  2006.  Comcast  increased  the  availability  of  its  Digital  Voice  Service  by  seven  million 
 households  since  November  2005.  764  As  of  September  30,  2005,  Time  Warner  had  launched  its  VoIP  service,  Digital  Phone,  in  all  of  its  31  divisions.  As  a  result,  it  now  provides  service  to  854,  000 
 subscribers  and  can  provide  service  to  three  quarters  of  homes  passed.  765  Time  Warner  claims  to  be  adding  thousands  of  additional  subscribers  per  month.  766  By  comparison,  Adelphia  does  not  offer  cable 
 telephony  to  its  subscribers  and  has  cancelled  plans  to  launch  service  on  its  own.  767 
 251.  Finally,  Applicants  claim  that  they  would  improve  high-  speed  Internet  service  for  Adelphia  customers  and  increase  penetration  rates  in  Adelphias  service  areas.  768  According  to 


 Applicants,  while  Adelphia  offers  high-  speed  Internet  service  to  96.2%  of  its  subscribers,  only  14.4%  of  homes  passed  subscribe  to  the  service.  In  contrast,  Comcasts  penetration  is  18.3%,  and  Time  Warners  is 
 20.8%.  Time  Warner  states  that  it  currently  has  over  4.3  million  high-  speed  Internet  subscribers  and  recently  launched  a  redesigned  version  of  its  Road  Runner  service  and  faster  download  speeds  in  all 
 divisions.  Time  Warners  standard  service  offers  a  downstream  speed  of  5  Mbps,  and  its  premium  service  offers  speeds  up  to  8  Mbps.  769  Comcast  states  that  it  currently  has  8.1  million  customers  and  that  service 
 is  available  to  40  million  homes.  Comcasts  high-  speed  service  offers  speeds  up  to  6  Mbps  downstream  and  768  kbps  upstream.  770 


 252.  In  support  of  their  claims,  Applicants  provide  details  regarding  projected  investments  and  timetables  for  the  completion  of  upgrades  and  the  rollout  of  services.  Comcast  and  Time  Warner  state 
 that  they  have  earmarked  $800  million  collectively  to  upgrade  the  less  advanced  Adelphia  cable  systems.  Specifically,  Comcast  states  that  it  has  set  aside  over  $150  million  over  the  next  two  years  for  capital 
 improvements  to  the  Adelphia  systems,  and  Time  Warner  has  allocated  $650  million  costs  to  be  invested  in  the  systems  it  acquires.  771  Time  Warner  indicates  that  $275  million  will  be  devoted  to  upgrading 


 (Continued  from  previous  page)  month-  long  program,  in  partnership  with  C-  SPAN,  which  brought  40  national  leaders  into  local  high  school 
 classrooms);  Letter  from  James  R.  Coltharp,  Comcast  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Nov.  22,  2005)  (  Comcast  Nov.  22,  2005  Ex  Parte)  at  Att.  1  at  1-  5. 


 763  Comcast  Nov.  18,  2005  Ex  Parte,  Att.  (  Advanced  Services  Benefits)  at  11;  Time  Warner  Nov.  10,  2005  Ex 
 Parte,  Ex.  1  (  Benefits  Presentation)  at  18-  21.  764 
 Comcast  Mar.  29,  2006  Ex  Parte  at  2.  In  addition  to  its  VoIP  service  customers,  Comcast  also  provides  circuit-switched  telephony  in  18  markets  to  approximately  1.  1  million  subscribers.  Comcast  Nov.  22,  2005  Ex  Parte  at  6 


 n.  10.  765 
 Public  Interest  Statement  at  29;  Time  Warner  Nov.  10,  2005  Ex  Parte,  Decl.  of  Gerald  D.  Campbell  at  1.  766 
 Public  Interest  Statement  at  30;  Time  Warner  Nov.  10,  2005  Ex  Parte,  Ex.  1  (  Benefits  Presentation)  at  15.  767 
 Comcast  Nov.  18,  2005  Ex  Parte,  Att.  at  9.  In  2004,  Adelphia  began  preparations  to  offer  VoIP  service,  including  product  development,  initiation  of  a  technical  trial,  and  interoperability  testing,  but  the  company 


 subsequently  terminated  its  VoIP  service  plans.  Adelphia  Communications  Corp.,  SEC  Form  10-  K  for  the  Year  Ended  December  31,  2004  at  10;  Comcast  Nov.  22,  2005  Ex  Parte  at  4. 


 768  Public  Interest  Statement  at  46  (stating  that  HSD  penetration  will  surely  grow  in  areas  currently  served  by 
 Adelphia  as  a  result  of  the  Transactions.);  Comcast  Nov.  18,  2005  Ex  Parte,  Att.  (  Advanced  Services  Benefits)  at  2-  3;  Comcast  Nov.  22,  2005  Ex  Parte  at  2. 


 769  Public  Interest  Statement  at  28,  46. 
 770  Id.  at  38;  Comcast  Nov.  22,  2005  Ex  Parte  at  11. 
 771  Public  Interest  Statement  at  48  &  n.  111.  Applicants  explain  that  this  amount  is  in  addition  to  other  sums  set 
 aside  for  capital  improvements  to  Adelphias  systems.  Comcast  also  intends  to  invest  [REDACTED]  for  its  digital  Simulcast  roll-  out.  Most  of  the  capital  expenditure,  however,  would  be  for  Comcasts  purchase  of  digital  set-  top 


 (continued.) 
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 Adelphia  systems  to  750  MHz.  772  Comcast  expects  that  most  of  the  set-  aside  capital  will  be  spent  on  upgrade  revisits,  which  is  additional  work  that  must  be  completed  on  systems  that  Adelphia  considers 
 upgraded,  but  Comcast  considers  insufficient,  for  the  delivery  of  advanced  services.  773  Comcast  claims  that  a  vast  majority  of  the  expenditures  would  be  for  upgrades  and  system  improvements  that  currently 
 are  not  contemplated  by  Adelphias  management.  774  In  total,  Comcast  estimates  that  it  will  need  to  invest  nearly  [REDACTED]  in  the  current  Adelphia  systems  to  deliver  advanced  services  and  maintain  these 
 systems  at  Comcasts  standards.  775 
 253.  The  Applicants  claim  that  some  of  Adelphias  current  750  MHz  systems  need  to  be  hardened  in  order  to  provide  VoIP  service,  which  will  require  the  installation  of  new  network 


 equipment  and  other  upgrades  necessary  to  bring  the  Adelphia  systems  up  to  industry  standards.  Time  Warner  plans  to  commence  upgrading  Adelphia  systems  within  120  to  180  days  post-  closing.  776  Within 
 90  to  180  days,  Time  Warner  hopes  to  launch  Digital  Phone  service,  starting  with  Adelphia  systems  that  already  are  upgraded  to  750  MHz  and  in  close  proximity  to  Time  Warners  existing  operations,  where  it 
 has  the  infrastructure,  office  operations,  backbone  network,  and  connectivity  to  incumbent  LEC  rate  centers  already  in  place.  777  Within  120  to  180  days,  Time  Warner  plans  to  roll  out  VOD  service  on 
 Adelphia  systems  that  are  in  close  proximity  to  existing  Time  Warner  systems  and  are  currently  VOD-capable.  Time  Warner  plans  to  initiate  the  service  on  those  Adelphia  systems,  because  the  infrastructure 
 and  resources  are  already  in  place.  Time  Warner  does  not  indicate  when  the  upgrades  will  be  completed.  Comcast  has  not  indicated  when  it  plans  to  launch  telephony  service  or  VOD  in  Adelphias  service  areas. 
 It  states,  however,  that  it  plans  to  invest  [REDACTED]  to  upgrade  Adelphia  systems  for  cable  telephony  and  projects  that  telephony  service  will  be  substantially  deployed  in  2007.  778  Comcast  states  that  it  has 
 designated  [REDACTED]  in  capital  expenditures  to  upgrade  and  deploy  VOD  services  but  does  not  indicate  when  VOD  will  be  deployed  on  Adelphias  systems.  779 


 254.  Commenting  in  support  of  the  Application,  many  non-  profit  organizations  echo  predictions  that  Applicants  would  offer  new  and  better  services  to  Adelphias  subscribers  and  that  they 
 would  improve  conditions  in  Adelphia  cable  markets.  780  DIRECTV  asserts,  however,  that  none  of  the  claimed  benefits  regarding  improved  services  to  Adelphias  subscribers  are  transaction-  specific,  because 
 they  could  be  achieved  by  any  of  the  parties  who  bid  in  the  bankruptcy  courts  asset  auction.  Thus,  DIRECTV  concludes,  unless  the  Applicants  are  claiming  that  they  can  offer  better  service  to  Adelphia 
 subscribers  and  have  a  better  track  record  than  other  bankruptcy  bidders,  the  claimed  benefits  are  not 


 (Continued  from  previous  page)  boxes,  which  will  cost  the  company  [REDACTED]  .  Comcast  expects  the  installation  of  digital  converters  to  take 
 several  years.  Comcast  Nov.  22,  2005  Ex  Parte  at  11.  772 
 Time  Warner  Nov.  10,  2005  Ex  Parte,  Ex.  1  (  Benefits  Presentation)  at  14.  773 
 Comcast  Nov.  22,  2005  Ex  Parte  at  4.  774 
 Id.  775 
 Id.  at  3.  776 
 Time  Warner  Nov.  10,  2005  Ex  Parte,  Ex.  1  (  Benefits  Presentation)  at  14.  777 
 Time  Warner  Nov.  10,  2005  Ex  Parte  at  4.  While  Time  Warner  has  not  established  a  firm  rollout  schedule  for  Digital  Phone  on  systems  to  be  acquired,  its  goal  is  to  use  commercially  reasonable  efforts  to  begin  the  rollout  of 


 Digital  Phone  service  on  Adelphia  systems  to  be  acquired  in  one  or  more  of  these  areas  as  soon  as  90  to  180  days  after  closing.  Id.,  Decl.  of  Gerald  Campbell  at  2. 
 778  Comcast  Nov.  18,  2005  Ex  Parte,  Att.  (  Advanced  Services  Benefits)  at  8-  9. 
 779  Id.  at  3,  12. 
 780  See,  e.  g.,  Americans  for  Prosperity  Letter  at  1;  Americans  for  Tax  Reform  Letter  1;  FreedomWorks  Letter  at  1. 
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 transaction-  specific.  781  Citing  the  News  Corp.-  Hughes  Order,  DIRECTV  further  claims  that  we  cannot  consider  the  Applicants  set-  aside  capital  earmarked  for  improvements  as  a  benefit,  because  Adelphia  had 
 other  options  for  exiting  bankruptcy.  782 
 255.  The  Applicants  reject  DIRECTVs  objections,  claiming  that  any  comparisons  between  the  Applicants  and  other  potential  acquirers  of  Adelphia  are  barred  by  section  310(  d)  of  the 


 Communications  Act.  783  Further,  the  Applicants  assert  that  it  is  improper  for  the  Commission  to  consider  whether  other  potential  bidders  have  a  better  track  record  in  deploying  advanced  services.  The  Applicants 
 state  that  the  Commission  must  focus  on  the  claimed  benefits  submitted  in  the  Application  without  reference  to  whether  other  bankruptcy  bidders  could  deliver  the  same  benefits. 


 256.  Discussion.  As  the  Commission  has  stated  many  times,  the  deployment  of  advanced  video  services  is  a  recognized  public  interest  benefit.  784  In  reviewing  previous  transactions,  the 
 Commission  also  has  found  that  accelerated  deployment  of  high-  speed  Internet  service  and  the  provision  of  competitive,  facilities-  based  telephony  service  are  cognizable  public  interest  benefits.  785  In  this  case, 
 we  have  considered  whether  Adelphia  subscribers  are  more  likely  than  not  to  obtain  additional  or  superior  advanced  video  services,  VoIP  service,  and  high-  speed  Internet  service  post-  transaction  or  to  obtain  these 
 services  more  quickly  than  would  otherwise  be  the  case.  Thus,  we  find  it  more  likely  than  not  that  the  proposed  transactions  will  have  a  positive  impact  on  the  deployment  of  certain  advanced  services  to 
 Adelphia  subscribers. 
 257.  We  also  find  it  likely  that  Comcast  and  Time  Warner  will  improve  the  quality  and  availability  of  advanced  services  on  Adelphias  systems  and  that  Adelphia  subscribers  will  benefit  from 


 the  transactions  in  this  regard.  Comcasts  and  Time  Warners  timely  deployment  of  advanced  services  on  their  own  systems,  especially  those  systems  that  Comcast  acquired  from  AT&  T  Broadband,  suggests  that 
 they  will  further  deploy  advanced  video  services,  facilities-  based  telephony  service,  and  high-  speed  Internet  service  on  Adelphias  systems.  We  also  find  that  the  Applicants  have  provided  sufficient 
 information  to  conclude  that  the  upgrades  likely  will  occur  in  the  near  future.  In  addition,  Comcast  and  Time  Warner  have  quantified  the  investments  they  will  make  in  order  to  deliver  these  benefits. 


 258.  In  particular,  we  find  the  proposed  transactions  likely  will  result  in  accelerated  deployment  of  VoIP  service  in  Adelphia  service  areas.  Comcast  and  Time  Warner  currently  offer  VoIP 
 service,  and  both  have  plans  to  continue  their  rollouts.  Comcast  already  has  launched  VoIP  service  and  projects  that  it  will  be  fully  deployed  on  its  own  systems  in  2006.  786  As  noted  above,  while  Comcast  has 
 not  stated  when  it  will  initiate  upgrades  and  deployment,  it  projects  that  VoIP  service  will  be  substantially  deployed  on  the  acquired  Adelphia  systems  in  2007.  Time  Warners  Digital  Phone  service  has  been 
 launched  in  all  of  its  cable  divisions  and  is  available  to  over  three-  quarters  of  homes  passed.  787  Time  Warner  also  states  that  it  will  begin  upgrades  and  initiate  deployment  of  VoIP  service  in  three  to  six 


 781  DIRECTV  Comments  at  37-  39;  DIRECTV  Feb.  16,  2006  Ex  Parte  at  5;  see  also  Letter  from  Center  for  Creative 
 Voices  in  Media  (  CCVM),  CWA,  DIRECTV,  MASN,  MAP,  RCN,  and  TAC  to  Marlene  H.  Dortch,  Secretary,  FCC  (Jan.  23,  2006)  (  CCVM  Jan.  23,  2006  Ex  Parte)  at  2-  3. 


 782  DIRECTV  Comments  at  37-  39. 
 783  Applicants  Reply  at  6-  7;  Applicants  Response  to  DIRECTVs  Surreply  at  10. 
 784  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23316-  17    182-  85;  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9886 
   160;  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  614-  15    327.  785 
 See,  e.  g.,  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23323    199.  786 
 Public  Interest  Statement  at  39.  787 
 Time  Warner  Nov.  10,  2005  Ex  Parte,  Decl.  of  Gerald  Campbell  at  1. 
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 months.  In  comparison,  Adelphia  does  not  offer  or  have  plans  to  offer  cable  telephony  to  any  of  its  customers.  788 
 259.  We  also  find  that  the  transactions  likely  would  accelerate  the  completion  of  upgrades  on  Adelphias  systems  and  the  deployment  of  advanced  video  services.  In  particular,  we  find  it  likely  that 
 the  Applicants  would  be  able  to  provide  local  VOD  content  sooner  than  Adelphia  could  absent  the  transactions.  Adelphia  does  not  offer  local  VOD  currently  and  has  no  plans  to  provide  this  type  of 
 programming  in  the  near  future.  At  the  same  time,  however,  we  find  that  Adelphia,  on  its  own,  is  continuing  to  make  system  improvements  and  is  providing  its  customers  with  some  of  the  same  advanced 
 video  services  as  Comcast  and  Time  Warner  provide.  789  Thus,  we  find  it  likely  that  Adelphia,  on  its  own,  could  continue  to  provide  improvements  in  its  advanced  video  service  offerings.  790  It  is  likely,  however, 
 that  large-  scale  upgrades  and  service  improvements  would  be  delayed  significantly  due  to  the  bankruptcy  proceedings.  Thus,  the  transactions  likely  would  accelerate  the  system  upgrades  and  deployment  of  new 
 and/  or  improved  services.  Although  the  Applicants  have  not  given  definitive  time  tables  for  initiating  and  completing  the  planned  system  upgrades  and  deployment  of  new  and  advanced  services,  we  expect  that 
 Comcast  and  Time  Warner  have  sufficient  incentives  to  carry  out  the  proposed  improvements  in  a  timely  manner,  because  doing  so  serves  the  goal  of  maximizing  revenues  and  competing  effectively  with  LECs 
 and  DBS  providers. 
 260.  We  are  unable  to  conclude  from  the  information  submitted  in  the  record,  however,  that  Comcast  and  Time  Warner  will  provide  significantly  better  or  higher  quality  high-  speed  Internet  service 


 in  Adelphia  service  areas.  While  Comcast  and  Time  Warner  offer  examples  of  their  efforts  to  innovate  and  improve  their  high-  speed  Internet  service  offerings,  neither  provides  specific  plans  to  initiate  better 
 service  or  increase  penetration  rates  on  Adelphias  systems.  Nor  do  Applicants  explain  how  their  high-  speed  Internet  service  is  superior  to  Adelphias.  Unlike  VoIP  service,  which  Adelphia  does  not  offer,  as 
 of  year-  end  2004,  Adelphia  offered  high-  speed  Internet  service  to  approximately  97%  of  homes  passed  by  its  plant.  791  In  addition,  Adelphias  current  high-  speed  Internet  offerings  appear  to  be  comparable  to  Time 
 Warners  and  Comcasts.  792  In  2005,  Adelphia  increased  its  subscribership  for  high-  speed  Internet  service  by  24%  to  1.6  million.  793  Therefore,  we  do  not  give  weight  to  the  claim  that  the  transactions  will 
 result  in  faster  deployment,  higher  penetration  rates,  or  better  quality  high-  speed  Internet  service. 


 788  Public  Interest  Statement  at  46;  Comcast  Nov.  18,  2005  Ex  Parte  at  9. 
 789  For  instance,  Adelphia  recently  expanded  its  Vermont  cable  system  by  200  miles,  is  preparing  to  convert  all  of 
 the  channels  on  that  system  to  digital  in  early  2006,  and  continues  to  add  high-  definition  and  on-  demand  programming  to  the  systems  channel  line-  up.  Most  Adelphia  Customers  Will  See  Rate  Boost,  RUTLAND  HERALD, 


 Nov.  24,  2005.  790 
 For  instance,  Adelphia  recently  rebuilt  its  customer  care  operations  from  the  ground  up,  creating  a  highly  centralized,  highly  standardized  infrastructure.  Adelphia  Takes  a  Uniform  Approach,  Focus  on  Customer  Care 


 Newsletter,  BROADCASTING  &  CABLE/  MULITCHANNEL  NEWS,  Nov.  23,  2005.  791 
 Adelphia  Communications  Corp.,  SEC  Form  10-  K  for  the  year  Ended  December  31,  2004  at  6.  We  expect  this  percentage  rate  has  increased  within  the  last  year. 


 792  Adelphias  standard  high-  speed  Internet  service  offers  speeds  of  4  Mbps  download  and  384  kbps  upload,  and  its 
 premier  service  offers  6  Mbps  download  and  768  kbps  upload  speeds.  Adelphia,  Premier  High  Speed  Internet,  at  http://  www.  adelphia.  com/  high_  speed  _internet/  pl_  premier.  cfm  (last  visited  June  20,  2006).  While  Adelphias 


 standard  service  offers  somewhat  slower  speeds,  the  average  customer  would  not  perceive  a  difference  while  using  the  service.  None  of  the  companies  guarantee  transmission  speeds,  as  speeds  of  Internet  service  depend  on  factors 
 such  as  the  location  of  the  customer,  the  customers  equipment,  and  Internet  traffic.  793 
 As  of  September  30,  2005,  Adelphia  has  1,  646,  000  high-  speed  Internet  customers.  Adelphia  Communications  Corp.,  SEC  Form  10-  Q  for  the  Quarter  Ended  September  30,  2005  at  53. 
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 261.  With  respect  to  DIRECTVs  objections,  we  find  that  the  deployment  of  advanced  services  is  a  transaction-  specific  benefit.  We  recognize  that  Adelphia  had  other  options  for  exiting 
 bankruptcy,  and  that  these  other  options  potentially  could  yield  transaction-  specific  consumer  benefits.  We  note,  however,  that  the  Commission  does  not  have  to  find  that  a  proposed  transaction  or  merger  is  the 
 only  means  to  achieve  a  claimed  benefit.  Instead,  we  must  determine  whether  a  transaction  will  more  likely  than  not  result  in  the  claimed  benefit.  794  When  determining  whether  a  proposed  benefit  is 
 transaction-  specific,  we  ask  whether  the  benefit  likely  will  be  accomplished  in  the  absence  of  either  the  proposed  transaction  or  another  means  having  comparable  or  lesser  anticompetitive  effects.  For  instance, 
 we  consider  alternative  business  solutions  available  to  the  merging  firms,  such  as  divestiture,  licensing,  or  joint  ventures.  795  We  do  not  measure  the  proposed  benefits  of  a  pending  transaction  against  the  potential 
 harms  and  benefits  resulting  from  an  alternative  transaction.  796  If  we  did,  we  would  be  required  to  compare  all  proposed  mergers  with  conjectural  applications  not  before  the  Commission.  Such  analysis 
 would  be  inconsistent  with  section  310  of  the  Act  and  is  beyond  the  scope  of  our  analytical  framework  for  evaluating  proposed  transactions.  797  DIRECTV  also  suggests  that  the  Commission  should  disregard  the 
 Applicants  track  record  for  providing  services,  because  they  did  not  rank  the  highest  in  customer  service  in  various  surveys.  798  We  reject  the  notion  that  the  Applicants  must  show  that  they  are  the  best 
 performing  cable  operators  in  order  for  us  to  consider  their  track  records  for  completing  upgrades,  deploying  new  services,  and  customer  service  responses  when  determining  whether  a  claimed  benefit 
 likely  would  materialize  or  would  flow  through  to  consumers.  799 
 262.  We  likewise  disagree  with  DIRECTV  that  the  capital  set-  aside  for  upgrades  is  not  transaction-  specific.  DIRECTVs  reliance  on  the  News  Corp.-  Hughes  Order  is  misplaced.  In  News 


 Corp.-  Hughes,  News  claimed  that  Hughes,  as  a  wholly  owned  subsidiary  of  GM,  had  a  limited  ability  to  attract  outside  finances  because  it  had  issued  only  a  tracking  stock,  and  its  parent  company  was  not  fully 
 financing  Hughes.  As  a  claimed  benefit  to  the  proposed  transaction,  News  Corp.  suggested  that  Hughes  more  easily  could  seek  outside  financing  because  it  would  no  longer  be  a  subsidiary  of  GM.  The 
 Commission  found  the  proposed  benefit  not  to  be  transaction-  specific,  because  there  were  other  means  besides  the  proposed  merger  for  Hughes  to  gain  access  to  capital.  For  instance,  the  Commission  noted 
 that  GM  could  have  split-  off  Hughes  so  the  company  had  a  separately  traded  stock.  800  News  Corp.  was  not  proposing  to  invest  capital  into  the  company  or  promising  specific  outside  financing  as  a  direct  result 
 of  the  transaction.  Here,  in  contrast,  as  a  direct  result  of  the  transactions  at  issue,  Applicants,  combined,  are  proposing  to  invest  between  $800  million  and  [REDACTED]  to  undertake  upgrades  and  advanced 
 services  rollouts.  801  Given  Adelphias  bankruptcy,  it  is  not  apparent  that  other  sources  of  capital  are  readily  available.  We  find,  therefore,  that  the  capital  contributions  proposed  by  the  Applicants  are 
 transaction-  specific  and  that  the  benefit  would  not  be  likely  to  occur,  or  would  not  occur  as  quickly,  absent  the  proposed  transactions. 


 794  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9886    160. 
 795  See  Horizontal  Merger  Guidelines    4  n.  35;  EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20646    230;  AT&  T- 
 MediaOne  Order,  15  FCC  Rcd  at  9886    160.  796 
 Horizontal  Merger  Guidelines    4.  797 
 See  47  U.  S.  C.    310(  d);  Sprint-  Nextel  Order,  20  FCC  Rcd  at  14013-  14    129-  30;  AT&  T-  MediaOne  Order,  15  FCC  Rcd  at  9883    154;  see  also  Applicants  Response  to  DIRECTVs  Surreply  at  10. 


 798  DIRECTV  Comments  at  38-  39;  see  also  CCVM  Jan.  23,  2006  Ex  Parte  at  3  n.  6. 
 799  See  supra  Section  VIII.  A.  for  the  analytical  framework  for  considering  potential  public  interest  benefits. 
 800  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  621    350. 
 801  Public  Interest  Statement  at  48;  Comcast  Nov.  18,  2005  Ex  Parte,  Att.  (  Advanced  Services  Benefits)  at  3. 
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 263.  As  a  condition  to  the  merger,  commenters  ask  the  Commission  to  monitor  Comcasts  and  Time  Warners  deployment  of  advanced  services,  particularly  in  rural  and  minority  areas,  to  determine 
 whether  the  transactions  would  have  any  negative  impact  on  consumers,  workers,  or  communities,  and  whether  the  upgrades  and  deployments  happen  in  a  timely  manner.  802  As  we  have  stated,  we  find  that  the 
 transactions  likely  will  accelerate  system  upgrades  and  deployment  of  new  and/  or  improved  services.  In  particular,  we  find  that  the  transactions  likely  will  result  in  the  availability  of  a  new  telephony  service  in 
 the  Adelphia  service  areas,  an  offering  that  would  compete  with  service  provided  by  incumbent  LECs.  We  are  satisfied  that  the  Applicants  have  demonstrated  their  intention  to  initiate  the  upgrades  and 
 implement  new  services.  Both  Comcast  and  Time  Warner  have  submitted  various  upgrade  and  deployment  plans,  which  lend  support  to  their  assurances  that  they  intend  to  provide  new  services  in  the 
 near  future.  In  addition,  Comcast  and  Time  Warner  repeatedly  have  assured  the  Commission  of  their  intentions  to  implement  advanced  video  services  and  VoIP  service  in  a  timely  manner.  We  have  no 
 reason  to  conclude  that  these  representations  were  not  made  in  accordance  with  the  Commissions  candor  and  truthfulness  requirements.  Finally,  market  forces  and  shareholder  expectations  provide  significant 
 incentives  for  the  Applicants  to  deliver  on  the  promised  new  services.  Accordingly,  we  deny  CWAs  request  to  condition  our  approval  of  the  license  transfers. 


 2.  Clustering  of  Comcast  and  Time  Warner  Systems 
 264.  We  have  observed  over  the  years  that  MSOs  have  engaged  in  the  strategy  of  clustering,  whereby  many  of  the  largest  MSOs  have  concentrated  their  operations  by  acquiring  cable  systems  in 


 regions  where  the  MSO  already  has  a  significant  presence,  while  giving  up  other  holdings  scattered  across  the  country.  This  strategy  is  accomplished,  as  it  is  in  the  transactions  under  review  here,  through 
 purchases  and  sales  of  cable  systems,  or  by  system  swapping  among  MSOs.  803  The  proposed  transactions  would  result  in  more  clustered  operations  for  Comcast  in  Pennsylvania;  Minnesota;  Southern 
 Florida;  the  mid-  Atlantic  region  (Washington,  D.  C.,  Maryland,  and  Virginia);  and  New  England,  and  for  Time  Warner  in  Western  New  York,  Ohio,  Texas,  Southern  California,  Maine,  North  Carolina,  and  South 
 Carolina.  804  Applicants  claim  that  the  increased  clustering  of  their  respective  cable  systems  resulting  from  the  transactions  would  lead  to  public  interest  benefits. 


 265.  First,  Applicants  claim  that  by  further  clustering  their  cable  systems  through  the  Adelphia  acquisition  and  cable  system  swaps  between  Comcast  and  Time  Warner,  Comcast  and  Time  Warner 
 would  be  better  positioned  to  compete  effectively  against  DBS  providers  for  video  and  Internet  access  services  and  against  LECs  for  the  provision  of  the  voice-  video-  data  triple  play.  805  According  to 
 Applicants,  increased  clustering  would  give  each  Applicant  larger  regional  footprints,  ones  more  closely  approaching  the  national  footprints  of  the  DBS  providers  and  the  regional  footprints  of  the  major 
 incumbent  LECs.  806  Applicants  claim  that  their  newly  enlarged  footprints  would  create  a  more  robust  competitive  environment  in  response  to  the  DBS  industrys  national  marketing  campaigns.  807  The 
 Applicants  also  contend  that  enhancing  their  footprints  is  crucial  to  enabling  them  to  compete  effectively 


 802  CWA  Dec.  16,  2005  Ex  Parte  at  2;  NHMC  Petition  at  6;  NHMC  May  1,  2006  Ex  Parte  at  1. 
 803  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video  Programming,  Third 
 Annual  Report,  12  FCC  Rcd  4358,  4427    137  (1997)  (  Third  Annual  Video  Competition  Report)  (citing  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video  Programming,  Second  Annual 


 Report;  11  FCC  Rcd  2060,  2128    142  (1995));  Eleventh  Annual  Video  Competition  Report,  20  FCC  Rcd  at  2830    141. 


 804  Public  Interest  Statement  at  54. 
 805  Id.  at  51-  56. 
 806  Applicants  Reply  at  Ex.  C,  D. 
 807  Public  Interest  Statement  at  51. 
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 with  LECs,  who  are  beginning  to  provide  facilities-  based  video  services  in  conjunction  with  their  current  voice  and  Internet  service  offerings.  808 
 266.  Second,  Applicants  contend  that  the  location  of  the  existing  Time  Warner,  Comcast,  and  Adelphia  cable  properties  present  a  unique  opportunity  to  achieve  efficiencies  and  enhance  the  rollout  of 
 advanced  services  to  consumers  currently  served  by  more  fragmented  systems.  809  In  particular,  Applicants  claim  clustering  would  create  overhead  efficiencies,  more  efficient  deployment  of 
 management  and  other  employees  over  larger,  more  contiguous  service  areas,  and  infrastructure  efficiencies,  such  as  consolidation  of  head-  end  facilities.  810  Applicants  expect  to  provide  more  efficient 
 service  to  consumers  through  in-  house  technical  assistance  located  closer  to  the  communities  of  the  acquired  systems,  improved  coordination  of  technicians  and  truck  fleets  through  centralized  facilities,  and 
 enhanced  responsiveness  of  customer  account  executives.  Time  Warner  estimates  that  its  transaction-related  cost  savings  would  be  in  the  range  of  $200  million,  principally  from  the  elimination  of  redundant 
 corporate  and  regional  operations  and  reductions  in  programming  costs.  811  Applicants  state  that  the  efficiencies  would  produce  consumer  benefits  through  increased  investment  in  programming  and  cable 
 infrastructure  upgrades.  812  Neither  Applicant  attempts  to  quantify  the  flow-  through  of  these  benefits  to  consumers. 


 267.  Applicants  claim  that  enhanced  clustering  would  create  marketing  efficiencies  that  are  particularly  important  with  respect  to  the  rollout  of  new  services  that  require  aggressive  and  expensive 
 marketing  campaigns  to  educate  and  attract  consumers.  813  Applicants  state  that  the  advertising  and  marketing  efficiencies  would  enable  them  to  improve  penetration  and  retention  rates  and  would  allow 
 them  to  mount  cost-  effective  advertising  campaigns  in  competition  with  DBS  providers  that  offer  service  nationally  and  LECs  that  provide  service  in  expansive  regional  footprints.  814  For  instance,  Time  Warner 
 states  that  it  currently  serves  less  than  10%  of  the  Los  Angeles  DMA,  making  it  inefficient  to  purchase  local  mass  media  advertising  to  generate  awareness  of  its  services.  As  a  result,  Time  Warner  states,  it 
 currently  does  not  purchase  radio,  print,  or  television  advertising  in  the  Los  Angeles  market.  815  Ultimately,  according  to  Time  Warner,  the  mass  marketing  and  additional  advertising  made  possible  by 
 increased  clustering  would  lead  to  greater  consumer  awareness  of  competitive  offerings,  more  vigorous  competition,  and  greater  choice.  816 


 268.  DIRECTV  contends  that  any  benefits  resulting  from  the  clustering  achieved  by  the  exchange  of  cable  systems  between  Comcast  and  Time  Warner  should  be  discounted,  because  these 
 changes  in  ownership  are  not  related  to  the  acquisition  of  the  Adelphia  systems.  817  Further,  DIRECTV  contests  Applicants  claim  that  the  cable  system  swaps  are  necessary  to  improve  service  for  Adelphia 
 subscribers  or  improve  services  on  existing  systems.  818  DIRECTV  also  contends  that  the  Applicants  have 
 808  Applicants  Reply  at  18-  19. 
 809  Public  Interest  Statement  at  57;  Applicants  Reply  at  10-  12,  18-  19. 
 810  Public  Interest  Statement  at  56;  Applicants  Reply  at  10. 
 811  Public  Interest  Statement  at  59;  Time  Warner  Nov.  10,  2005  Ex  Parte  at  5-  6.  Comcast  does  not  claim  specific 
 cost  savings  as  a  result  of  the  additional  clustering.  812 
 Public  Interest  Statement  at  57.  813 
 Id.  at  58.  814 
 Id.  at  50.  815 
 Time  Warner  Nov.  10,  2005  Ex  Parte  at  5  &  Ex.  1  (  Benefits  Presentation)  at  26.  816 
 Time  Warner  Nov.  10,  2005  Ex  Parte.  at  6.  817 
 DIRECTV  Comments  at  36-  37;  see  also  CCVM  Jan.  23,  2006  Ex  Parte  at  5.  818 
 DIRECTV  Comments  at  37. 
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 failed  to  validate,  quantify,  or  show  how  increased  clustering  would  provide  a  benefit  that  would  flow  through  to  consumers.  819  In  support  of  its  position,  DIRECTV  submits  an  analysis  that  studies  whether 
 there  is  a  relationship  between  the  size  of  the  Applicants  clusters  and  the  availability  or  penetration  rates  of  advanced  services.  820  DIRECTV  contends  that  if  additional  clustering  benefits  consumers,  then  the 
 analysis  should  find  less  availability  and  lower  penetration  rates  of  advanced  services  in  smaller  cable  systems  than  in  larger  clustered  systems.  821  The  analysis  concludes,  however,  that  the  availability  of 
 advanced  services,  such  as  HSD  and  telephony  service,  is  often  the  same  for  Comcasts  and  Time  Warners  small  systems  as  it  is  for  larger  clusters,  822  and  therefore  it  concludes  that  there  is  no  systematic 
 relationship  between  the  availability  of  advanced  services  and  system  or  region  size.  823  In  addition,  DIRECTVs  analysis  does  not  find  a  statistically  significant  relationship  between  penetration  rates  and 
 cluster  size.  824 
 269.  In  response,  the  Applicants  acknowledge  that  the  two  aspects  of  the  proposed  transactions  theoretically  are  independent  of  each  other,  but  maintain  that  neither  the  swaps  without  the 


 acquisitions,  nor  the  acquisitions  without  the  swaps,  would  produce  the  benefits  that  these  transactions  combined  would  produce.  825  The  Applicants  explain  that  it  is  the  unique  convergence  of  the  location  of 
 systems  currently  owned  by  the  Applicants  and  the  systems  owned  by  Adelphia  that  would  produce  the  described  efficiencies  and  benefits.  826 


 270.  The  Applicants  also  dispute  DIRECTVs  econometric  study,  arguing  that  the  study  misses  the  point,  because  they  are  not  claiming  that  clustering  alone  will  lead  to  the  more  rapid 
 deployment  of  advanced  services.  Thus,  the  Applicants  assert  that  the  regressions  testing  the  relationship  between  penetration  rates  and  the  size  of  cable  system  clusters  do  not  undermine  their  claim  that  the 
 transactions  will  benefit  Adelphia  subscribers  by  resulting  in  accelerated  deployment  of  advanced  services.  827  In  addition,  the  Applicants  question  DIRECTVs  methodology,  claiming  that  the  study  is  too 


 819  Id.  at  40-  41;  DIRECTV  Surreply  at  21-  24  (citing  the  ALLTEL-  WWC  Order  and  the  Sprint-  Nextel  Order  for  the 
 level  of  support  for  claimed  benefits  the  Commission  requires  from  the  Applicants).  DIRECTV  also  states  that  while  Comcast  and  Time  Warner  have  been  clustering  for  years,  they  have  not  provided  data  to  suggest  that 


 clustering  has  resulted  in  lower  prices.  DIRECTV  Feb.  16,  2006  Ex  Parte  at  6.  820 
 Letter  from  William  M.  Wiltshire,  Harris,  Wiltshire  &  Grannis,  LLP,  Counsel  for  DIRECTV,  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  30,  2006)  (  DIRECTV  Mar.  30,  2006  Ex  Parte)  at  Att.  (Gustavo  Bamberger  and 


 Lynette  Neumann:  Analysis  of  the  Effect  of  Clustering  on  the  Availability  and  Penetration  of  Digital  Cable,  High-Speed  Data  and  Telephony  Services)  (  Bamberger  &  Neumann  Advanced  Services  Analysis);  Letter  from  William 
 M.  Wiltshire,  Harris,  Wiltshire  &  Grannis,  LLP,  Counsel  for  DIRECTV,  Inc.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (May  2,  2006)  (  DIRECTV  May  2,  2006  Ex  Parte)  at  1-  3;  see  also  Letter  from  Andrew  Jay  Schwartzman,  on 
 behalf  of  Free  Press,  et  al.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (May  1,  2006)  at  2-  4.  821 
 DIRECTV  Mar.  30,  2006  Ex  Parte,  Bamberger  &  Neumann  Advanced  Services  Analysis  at  4.  822 
 DIRECTV  Mar.  30,  2006  Ex  Parte  at  2,  Bamberger  &  Newmann  Advanced  Services  Analysis  at  6-  8.  823 
 DIRECTV  Mar.  30,  2006  Ex  Parte  at  2,  Bamberger  &  Newmann  Advanced  Services  Analysis  at  6-  8.  824 
 Id.  at  9-  11.  Although  DIRECTVs  analysis  suggests  a  positive  relationship  between  cluster  size  and  penetration  rates  for  Time  Warners  systems,  that  effect  is  limited  to  changes  in  cluster  size  below  250,000  basic  homes  passed. 


 Id.  at  11.  825 
 Public  Interest  Statement  at  69;  Applicants  Reply  at  13-  14.  826 
 Applicants  Reply  at  13-  14.  827 
 Letter  from  James  R.  Coltharp,  Comcast  Corp.,  Steven  N.  Teplitz,  Time  Warner  Inc.,  and  Michael  H.  Hammer,  Willkie  Farr  &  Gallagher,  LLP,  Counsel  for  Adelphia  Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary, 


 FCC  (Apr.  18,  2006)  at  1-  2. 
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 imprecise  and  underdeveloped  to  support  the  conclusions.  828  The  Applicants  state  that  the  study  reveals  only  that  clusters  of  different  sizes  have  varying  penetration  rates  and  availability  levels  for  certain 
 advanced  services.  They  contend  that  [  s]  tanding  alone,  this  showing  is  meaningless,  as  the  study  never  makes  a  serious  attempt  to  explain  why  these  differences  occur.  829  In  addition,  the  Applicants  state  that 
 the  relevant  issue  is  not  a  comparison  of  the  availability  and  penetration  rates  of  advanced  services  among  different  Comcast  and  Time  Warner  systems,  but  a  comparison  of  availability  and  penetration  rates  for 
 Adelphia  systems  before  and  after  being  integrated  with  Comcast  and  Time  Warners  existing  operations.  830 


 271.  Discussion.  The  Commission  has  noted  previously  that  clustering  can  have  both  procompetitive  and  anticompetitive  effects.  831  The  Commission  also  has  found  that  the  potential  benefits 
 from  clustering,  including  marketing  efficiencies  and  the  deployment  of  facilities-  based  telephony  and  Internet  access  services,  outweigh  any  potential  anticompetitive  effects  of  clustering  on  competition  in 
 product  markets  such  as  local  programming  or  advertising.  832  In  addition,  the  Commission  has  noted  that  clustering  can  increase  economies  of  scale  and  size,  and  thus  enable  cable  operators  to  offer  an  increased 
 variety  of  broadband  services  at  reduced  prices  to  customers  in  geographic  areas  that  are  larger  than  single  cable  franchise  areas.  Therefore,  the  Commission  has  noted  that  clustering  can  make  cable 
 operators  more  effective  competitors  to  LECs  whose  local  service  areas  are  usually  much  larger  than  a  single  cable  franchise  area.  833  The  Commission  also  has  stated  that  clustering  can  provide  a  means  of 
 improving  efficiency,  reducing  costs,  and  attracting  increased  advertising.  834  On  the  other  hand,  the  Commission  has  noted  that  clustering  can  present  a  barrier  to  entry  for  the  most  likely  potential 
 overbuilder  (i.  e.,  an  adjacent  cable  operator).  835  Moreover,  as  DIRECTV  notes  in  its  comments,  the  Commission  has  stated  in  its  Competition  Report,  that  [  w]  hile  clustering  may  help  reduce  programming 
 and  other  costs  as  claimed  by  commenters,  [the  Commissions]  findings  show  that  these  lower  costs  are  not  being  passed  along  to  subscribers  in  the  form  of  lower  monthly  rates.  836 


 828  Letter  from  James  R.  Coltharp,  Comcast  Corp.,  Steven  Teplitz,  Time  Warner  Inc.,  and  Michael  H.  Hammer, 
 Willkie  Farr  &  Gallagher,  LLP,  Counsel  for  Adelphia  Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Apr.  14,  2006)  at  5. 


 829  Id. 
 830  Id.  at  2.  DIRECTV  asserts  that  the  Applicants  criticisms  of  its  study  are  unsupported.  Moreover,  DIRECTV 
 states  that  it  does  not  have  access  to  the  data  necessary  to  evaluate  the  factors  that  the  Applicants  enumerate,  because  the  Applicants  alone  possess  the  data  necessary  to  perform  such  an  analysis,  though  they  have  yet  to  do  so. 


 DIRECTV  May  2,  2006  Ex  Parte  at  1-  2.  831 
 See  1993  Second  Report  &  Order,  8  FCC  Rcd  at  8573    17;  Third  Annual  Video  Competition  Report,  12  FCC  Rcd  at  4428    138;  Fourth  Annual  Video  Competition  Report,  13  FCC  Rcd  at  1115    140;  Annual  Assessment  of  the 


 Status  of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  Fifth  Annual  Report,  13  FCC  Rcd  24284,  24371    144  (1998)  (  Fifth  Annual  Video  Competition  Report). 


 832  1993  Second  Report  &  Order,  8  FCC  Rcd  at  8573    17;  1999  Cable  Ownership  Order,  14  FCC  Rcd  at  19124 
   63.  833 
 Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  Sixth  Annual  Report,  15  FCC  Rcd  978,  1051    162  (2000). 


 834  Fifth  Annual  Video  Competition  Report,  13  FCC  Rcd  at  24371    144. 
 835  Id. 
 836  DIRECTV  Comments  at  26  (citing  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the  Delivery 
 of  Video  Programming,  Seventh  Annual  Report,  16  FCC  Rcd  6005,  6072-  73    155  (2001)). 
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 272.  We  agree  with  the  Applicants  and  reiterate  the  Commissions  previous  findings  that  clustering  can  lead  to  certain  efficiencies  and  cost  savings.  837  We  find,  however,  that  the  Applicants  have 
 failed  to  provide  sufficient  supporting  evidence  for  us  to  verify  and  quantify  the  claimed  efficiencies  and  cost  savings  or  to  determine  the  extent  to  which  they  would  flow  through  to  consumers.  Although  Time 
 Warner  claims  that  the  cost  savings  would  amount  to  $200  million,  it  fails  to  explain  how  the  figure  was  derived  or  provide  any  other  support  for  this  figure.  Nor  do  the  Applicants  explain  why  the  transactions 
 would  lead  to  certain  savings,  such  as  savings  in  programming  costs.  838  Comcast  has  not  claimed  that  the  transactions  would  result  in  any  operational  cost  savings  for  the  company  at  all. 


 273.  Although  additional  clustering  may  enable  Comcast  and  Time  Warner  to  increase  their  marketing  efforts  in  a  more  cost-  efficient  manner,  or  perhaps,  to  participate  more  fully  in  national 
 marketing  campaigns,  the  Applicants  have  not  claimed  that  it  would  create  cognizable  benefits,  such  as  reduced  prices,  enhanced  service  offerings,  or  improved  service  quality.  Nor  have  they  claimed  that  the 
 advertising  and  marketing  efficiencies  would  spur  such  beneficial  responses  from  DBS  providers  or  LECs.  If  potential  cost  savings  would  only  reduce  the  Applicants  costs  and  would  not  result  in  reduced 
 prices  or  other  benefits  to  consumers,  than  the  alleged  cost  saving  are  not  a  cognizable  benefit  of  the  proposed  transaction. 


 274.  Moreover,  DIRECTV  correctly  asserts,  the  Commission  is  more  likely  to  discount  claimed  efficiencies  if  they  result  in  a  reduction  of  fixed  costs  rather  than  marginal  costs,  because 
 reductions  in  fixed  costs  are  unlikely  to  lead  to  a  reduction  in  prices  that  could  counteract  the  potential  anticompetitive  effects  of  a  transaction.  839  As  the  Commission  has  stated  previously,  benefits  generally 
 are  considered  cognizable  only  to  the  extent  that  they  can  mitigate  any  anticompetitive  effects  of  a  transaction.  840  Here,  the  Applicants  have  not  distinguished,  nor  is  it  clear,  whether  the  claimed  cost 
 savings  in  marketing  would  result  in  a  reduction  in  marginal  cost  or  a  reduction  in  fixed  cost.  Therefore,  we  cannot  determine  whether  it  is  likely  that  the  reductions  in  advertising  costs  would  likely  be  passed  on 
 to  consumers.  841  Thus,  while  more  cost-  effective  advertising  campaigns  may  financially  benefit  the  Applicants  by  decreasing  their  costs,  it  is  unclear  whether  they  would  result  in  a  net  increase  in  consumer 
 surplus,  which  can  be  balanced  against  any  anticompetitive  effects  of  a  transaction.  What  is  important  is  the  extent  to  which  these  lower  costs  can  lead  to  lower  prices,  not  whether  they  lead  to  lower  cost 
 structure  for  the  Applicants.  842 
 275.  We  also  are  not  persuaded  that  the  transactions  would  lead  to  a  more  competitive  environment  for  the  provision  of  the  triple  play  of  services    video,  voice,  and  data.  Cable  operators  are 


 currently  the  only  service  providers  offering  the  triple  play  package  on  a  widespread  basis.  DBS 


 837  We  do  not  make  any  determinations  based  on  the  Bamberger  &  Neumann  Advanced  Services  Analysis.  We  note 
 that  the  Analysis  fails  to  account  for  other  relevant  variables  that  could  explain  the  results  of  the  Analysis  and  does  not  employ  statistical  techniques  to  resolve  causality  issues.  We  also  note  that  the  Analysis  does  not  find  a 


 reduction  in  benefits  associated  with  clustering,  only  that  there  is  no  significant  statistical  relationship  between  availability  or  penetration  rates  of  advanced  services  and  cluster  size. 


 838  For  example,  Time  Warner  does  not  indicate  whether  these  savings  will  result  from  new  volume  discounts.  See 
 also  DIRECTV  Mar.  30,  2006  Ex  Parte  at  3  (stating  that  the  transactions  should  not  have  a  material  effect  on  programming  costs  because  Comcasts  national  subscriber  base  is  not  increasing,  and  Time  Warners  increase  from 


 10.  9  million  to  14.  4  million  subscribers  is  significant  enough  to  result  in  further  discounts).  839 
 DIRECTV  Surreply  at  21-  22;  DIRECTV  Mar.  30,  2006  Ex  Parte  at  3;  CCVM  Jan.  23,  2006  Ex  Parte  at  4.  840 
 EchoStar-  DIRECTV  HDO,  17  FCC  Rcd  at  20631    191  (citing  Bell  Atlantic-  NYNEX  Order,  12  FCC  Rcd  at  20063  (  Efficiencies  generated  through  merger  can  mitigate  competitive  harms  if  such  efficiencies  enhance  the 


 merged  firms  ability  and  incentive  to  compete.  .  .)).  841 
 See,  e.  g.,  id.  at  20637    210.  842 
 Id.  at  20637-  38    212. 
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 providers  currently  do  not  offer  facilities-  based  telephony  service;  thus,  cable  is  competing  with  DBS  providers  only  for  a  package  of  video  and  Internet  services.  843  While  two  LEC  providers,  Verizon  and 
 AT&  T,  recently  entered  the  video  services  market  in  a  few  communities  around  the  country,  844  for  the  most  part  LECs  are  currently  providing  video  programming  services  primarily  through  agreements  with 
 DBS  providers.  845  Thus,  the  Applicants  have  failed  to  show  that  further  clustering  is  necessary  to  effectively  compete  with  DBS  providers  and  LECs  in  the  provision  of  triple  play  services.  By  their  own 
 admission,  Comcast  and  Time  Warner  are  leaders  in  their  industry  for  the  provision  of  advanced  video  services  and  have  consistently  upgraded  their  systems  over  the  years  to  provide  new  and  better  quality 
 services.  Accordingly,  the  Commission  does  not  find  that  the  increased  clustering  will  result  in  a  better  competitive  environment  for  video  programming  service.  Therefore,  we  cannot  give  weight  to  this 
 claimed  benefit. 


 843  We  note  that  DBS  providers  resell  DSL  service  pursuant  to  business  arrangements  with  LECs,  and  thus,  do  not 
 compete  directly  in  the  telephony  service  marketplace.  DISH  Network  offers  customers  DSL  and  dial-  up  Internet  access  through  EarthLink.  DISH  Network,  Products  and  Services,  at 


 http://  www.  dishnetwork.  com/  content/  products/  internet/  index.  shtml  (last  visited  June  21,  2006).  DIRECTV  offers  DSL  Internet  access  through  various  LECs,  such  as  Verizon,  BellSouth,  Qwest,  and  EarthLink,  depending  on  the 
 customers  location.  DIRECTV,  Products,  at  http://  www.  directv.  com/  DTVAPP/  imagine/  InternetAccess.  jsp  (last  visited  June  21,  2006).  DISH  Network  and  DIRECTV  customers,  however,  would  receive  both  video  and  high- 
 speed  Internet  service  from  a  single  provider,  and  thus,  the  package  itself  could  be  considered  a  competitive  advantage. 
 844  In  September  2005,  Verizon  began  offering  its  FiOS  TV  service  in  Keller,  Texas,  a  community  located  within 
 the  Dallas/  Fort  Worth  DMA.  By  April  2006,  Verizon  was  offering  FiOS  TV  to  17  Dallas/  Fort  Worth  communities.  By  the  end  of  2006,  Verizon  expects  to  have  built  out  its  fiber  optic  system  to  serve  400,000  North  Texas 


 households,  or  33%  of  Verizons  landline  customers  in  Texas.  In  addition,  Verizon  began  offering  FiOS  TV  in  Herndon,  Reston,  and  surrounding  parts  of  Fairfax  County,  Virginia;  Nyack,  South  Nyack,  and  Massapequa  Park, 
 New  York;  Clarksville,  Columbia,  and  Ellicott  City,  Maryland;  Lynnfield,  Reading,  and  Woburn,  Massachusetts;  Temple  Terrace,  parts  of  Southern  Manatee  County,  and  parts  of  Hillsborough,  Florida;  and  Beaumont  and  Murrieta, 
 California.  See  Verizon,  Verizon  Begins  Offering  FiOS  TV  Service  in  its  Largest  Texas  Market  of  Plano  (press  release),  Apr.  18,  2006.  More  recently,  Verizon  has  launched  service  in  the  Town  of  Hempstead,  New  York; 
 Wesley  Chapel,  Florida;  some  communities  (Beach  Park,  Seminole,  Hyde  Park,  Sulphur  Springs,  Bayshore  Beautiful,  Palma  Ceia,  New  Tampa  and  areas  of  the  city  served  by  Verizon  around  the  University  of  South  Florida 
 and  Temple  Terrace)  within  the  Tampa,  Florida  city  limits;  and  Plano,  Texas.  See  Verizon,  Verizon  Expands  FiOS  TV  Availability  in  New  York  for  Consumers  in  the  Town  of  Hempstead  (press  release),  June  15,  2006;  Verizon, 
 Verizon  Customers  in  Wesley  Chapel,  Fla.,  Have  a  Choice  for  TV  Service  (press  release),  May  19,  2006;  Verizon,  Verizon  Customers  in  Tampa  Have  a  Choice  for  TV  Service  (press  release),  May  17,  2006;  Verizon,  Verizon  Begins 
 Offering  FiOS  TV  Service  in  its  Largest  Texas  Market  of  Plano  (press  release),  Apr.  18,  2006. 
 In  June  2006,  AT&  T  launched  its  video  service,  U-  verse  TV,  to  5,000  homes  in  San  Antonio.  AT&  Ts  service  extends  fiber  to  nodes  close  to  homes,  and  from  there  will  use  existing  copper  infrastructure  to  deliver  the  service. 
 Initially,  U-  verse,  which  uses  IP  technology,  provides  about  200  channels  of  programming,  including  premium-movies  and  sports  channels.  It  also  provides  features  such  as  fast  channel  changing,  video-  on-  demand,  three  set-  top 
 boxes,  and  a  digital  recorder.  When  AT&  T  launches  its  service  more  widely,  its  service  will  offer  additional  features,  including  high-  definition  programming  and  home  digital  video  recording.  AT&  T  expects  to  offer  the 
 service  to  15-  20  markets  by  the  end  of  2006,  and  the  company  has  plans  to  spend  $4.  6  billion  through  2008  to  bring  its  video  and  high-  speed  Internet  services  to  19  million  homes.  AT&  T,  AT&  T  Expands  U-  Verse  Services  in  San 
 Antonio  (press  release),  June  26,  2006;  CNET  News;  AT&  T  Launches  TV  Service,  at  http://  news.  com/  2102-  1034_  3-6088359.  html?  tag=  st.  util.  print  (last  visited  June  29,  2006). 


 845  Verizon,  Products  and  Services,  at  http://  www22.  verizon.  com/  Foryourhome/  ProductandService.  aspx  (last  visited 
 June  29,  2006);  BellSouth,  DIRECTV  Service,  at  http://  www.  bellsouth.  com/  consumer/  directv/  index.  html  (last  visited  June  21,  2006). 
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 276.  As  for  the  deployment  of  telephony  service,  we  reiterate  the  Commissions  previous  findings  that  clustering  could  better  position  cable  operators  as  potential  providers  of  the  service.  As 
 noted  in  Section  VIII.  B.  1,  to  the  extent  that  the  transactions,  through  clustering  or  through  the  proposed  upgrades  and  deployment  schedules,  result  in  the  addition  of  competitive,  facilities-  based  telephony 
 service  in  Adelphia  service  areas  or  to  unserved  areas  where  Applicants  currently  operate  cable  systems,  we  find  that  consumers  could  benefit. 


 277.  We  reject  DIRECTVs  contention  that  we  should  ignore  potential  benefits  from  the  increased  clustering  that  are  attributable  to  the  cable  system  swaps  between  Comcast  and  Time  Warner. 
 As  stated  previously,  what  is  before  us  in  this  proceeding  is  the  sum  of  all  proposed  transactions,  both  the  acquisitions  and  the  swaps.  The  Applicants  explain  that  [  i]  t  is  the  unique  convergence  of  the  location  of 
 systems  currently  owned  by  the  Applicants  and  the  systems  owned  by  Adelphia  that  allows  the  Applicants  to  achieve  benefits  from  additional  clustering.  846  The  Applicants  further  contend  [  n]  either  a 
 swap  of  existing  systems  independent  of  the  Adelphia  system  acquisitions,  nor  the  acquisition  of  Adelphia  systems  independent  of  systems  swaps,  would  produce  a  level  of  geographic  rationalization 
 capable  of  providing  the  competitive  benefits  and  efficiencies  described  by  the  Applicants.  847  That  one  might  have  occurred  without  the  other  is  immaterial  for  purposes  of  assessing  whether  the  transactions  are 
 likely  to  produce  the  claimed  public  interest  benefits.  Therefore,  when  we  consider  the  potential  public  interest  benefits  resulting  from  increased  clustering,  we  will  consider  the  clusters  that  are  created  pursuant 
 to  the  combination  of  the  acquisitions  and  the  cable  system  swaps. 
 3.  Resolution  of  Bankruptcy  Proceeding 
 278.  The  transactions  before  the  Commission  are  an  integral  part  of  Adelphias  plan  to  emerge  from  bankruptcy.  Adelphia  plans  to  sell  the  assets  of  the  majority  of  the  Debtors  pursuant  to  a  sale  under 


 section  363  of  the  Bankruptcy  Code  (  the  Sale),  848  and  to  sell  the  Debtors  equity  interests  in  two  joint  ventures  pursuant  to  a  plan  of  reorganization  recently  filed  with  the  bankruptcy  court  (  the  Joint  Venture 
 Plan).  849  If  the  Commission  did  not  approve  these  transactions,  the  Applicants  would  not  be  able  to  consummate  the  Sale  and  Joint  Venture  Plan  in  their  current  forms.  The  Applicants  argue  that 
 implementation  of  the  Sale  and  Joint  Venture  Plan  would  resolve  the  Adelphia  bankruptcy  in  a  manner 


 846  Applicants  Reply  at  13-  14. 
 847  Id.  at  14. 
 848  See  In  re  Adelphia  Communications  Corp.,  et  al.,  Order  Authorizing  (I)  Sale  of  Substantially  All  Assets  of 
 Adelphia  Communications  Corporation  and  Its  Affiliated  Debtors  to  Time  Warner  NY  Cable  LLC  and  to  Comcast  Corporation,  Free  and  Clear  of  Liens,  Claims,  Encumbrances,  and  Interests  and  Exempt  From  Applicable  Transfer 


 Taxes;  (II)  Assumption  and/  or  Assignment  of  Certain  Agreements,  Contracts  and  Leases;  and  (III)  the  Granting  of  Related  Relief,  Case  No.  02-  41729  (Bankr.  S.  D.  N.  Y.  June  28,  2006)  (  Order  Authorizing  363  Sale);  Debtors 
 Motion  Pursuant  to  Sections  105,  363,  365  and  1146(  c)  of  the  Bankruptcy  Code  and  Rules  2002,  6004,  6006,  and  9014  of  the  Federal  Rules  of  Bankruptcy  Procedure  Seeking  Approval  of:  (I)  A  Form  of  Notice  Regarding  Certain 
 Hearing  Dates  and  Objection  Deadlines;  (II)  New  Provisions  For  Termination  and  for  the  Payment  or  Crediting  of  the  Breakup  Fee;  (III)  the  Sale  of  Substantially  All  Assets  of  Adelphia  Communications  Corporation  and  Its 
 Affiliated  Debtors  to  Time  Warner  NY  Cable  LLC  and  Certain  Other  Assets  to  Comcast  Corporation  Free  and  Clear  of  Liens,  Claims,  Encumbrances,  and  Interests  and  Exempt  from  Applicable  Transfer  Taxes;  (IV)  the  Retention, 
 Assumption  and/  or  Assignment  of  Certain  Agreements,  Contracts  and  Leases;  and  (V)  the  Granting  of  Related  Relief,  Case  No.  02-  41729  (Bankr.  S.  D.  N.  Y.,  May  26,  2006)  (  363  Sale  Motion). 


 849  See  In  re  Adelphia  Communications  Corp.,  et  al.,  Order  Confirming  Debtors  Third  Modified  Fourth  Amended 
 Joint  Plan  of  Reorganization  Under  Chapter  11  of  the  Bankruptcy  Code  for  Century-  TCI  Debtors  and  Parnassos  Debtors  (Bankr.  S.  D.  N.  Y.  June  29,  2006),  plus  the  363  Sale  Motion  and  the  Third  Modified  Fourth  Amended  Joint 


 Plan  of  Reorganization  Under  Chapter  11  of  the  Bankruptcy  Code  for  Century-  TCI  Debtors  and  Parnassos  Debtors  (Bankr.  S.  D.  N.  Y.  June  22,  2006). 
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 that  advances  the  policies  of  bankruptcy  laws  850  and  that  the  Commission  has  an  obligation  to  promote  these  policies  as  a  part  of  its  public  interest  review  of  the  transactions.  851 
 279.  The  Applicants  contend  that  consummation  of  the  Sale  and  Joint  Venture  Plan  would  (1)  maximize  recovery  to  creditors;  852  (2)  fund  the  settlement  of  the  fraud  suit  brought  by  the  SEC  that  will 
 benefit  certain  defrauded  Adelphia  investors;  853  and  (3)  move  Adelphias  cable  systems  from  management  that  has  been  distracted  by  a  complicated,  costly,  and  time-  consuming  bankruptcy  to  well-respected, 
 stable  management.  854  The  Applicants  argue  that  if  the  Commission  were  to  deny  its  approval  of  the  transactions,  it  would  jeopardize  these  benefits  and  frustrate  the  efficient  and  economical 
 administration  of  the  bankruptcy  laws.  Adelphia  would  be  required  to  negotiate  and  execute  a  new  sale  arrangement  or  develop  a  stand-  alone  plan  of  reorganization.  The  Applicants  argue  that  this  outcome 
 would  be  contrary  to  public  policy,  because  Adelphia  would  incur  substantial  additional  costs  while  it  pursued  these  efforts  and  because  the  terms  of  its  transactions  with  Time  Warner  and  Comcast  are  most 
 likely  to  maximize  value  to  its  stakeholders.  855  The  Applicants  assert  that  because  the  debtor-  in-possession  and  the  bankruptcy  court  have  decided  that  these  transactions  are  the  best  way  for  Adelphia  to 
 emerge  from  bankruptcy,  856  the  Commission  is  required  to  accommodate  that  decision  to  the  greatest  extent  possible  in  its  public  interest  analysis.  857 


 280.  DIRECTV  maintains  that  the  Applicants  have  failed  to  show  that  resolving  the  Adelphia  bankruptcy  by  means  of  these  transactions  promotes  the  public  interest.  DIRECTV  contends  that  other 
 alternatives  for  the  disposition  of  Adelphias  cable  systems  would  present  fewer  competitive  concerns.  858  DIRECTV  also  argues  that  the  Applicants  have  not  established  that  Adelphia  is  a  failing  firm  and 
 therefore  cannot  assert  a  failing  firm  defense  to  justify  transactions  that  otherwise  would  be  found  to  have  unacceptable  anticompetitive  effects.  859  Finally,  DIRECTV  states  that  the  Commissions  obligation  to 
 consider  the  national  policies  underlying  the  bankruptcy  laws  does  not  supersede  the  Commissions  duty  under  section  310(  d)  to  ensure  that  the  transactions  serve  the  public  interest,  convenience  and 
 necessity.  860  DIRECTV  notes  that  the  bankruptcy  courts  role  is  to  protect  the  rights  of  creditors,  while  the  Commission  is  charged  with  a  broader  mandate  to  protect  the  public  interest.  861  No  other  party 
 commented  on  this  issue. 


 850  Public  Interest  Statement  at  60-  62;  363  Sale  Motion  at  27. 
 851  Public  Interest  Statement  at  20,  60. 
 852  Id.  at  60-  61. 
 853  Applicants  Reply  at  20  n.  66. 
 854  Public  Interest  Statement  at  62. 
 855  Id.  at  61-  62.  The  Applicants  estimate  the  costs  to  Adelphia  of  remaining  in  bankruptcy  during  any  renegotiations 
 at  $20  million  per  month.  Applicants  Reply  at  22.  856 
 Id.  at  20-  21.  857 
 Id.  at  21.  858 
 DIRECTV  Comments  at  34-  35.  Indeed,  DIRECTV  speculates  that  these  transactions  would  provide  maximum  value  to  creditors  simply  because  the  Applicants  will  share  with  them  the  anticipated  monopoly  rents  made  possible 


 by  the  transactions.  Id.  at  35.  859 
 Id.  at  34.  860 
 Id.  at  35  (citing  47  U.  S.  C.    310(  d)).  861 
 DIRECTV  Surreply  at  24-  25. 
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 281.  The  Applicants  respond  that  the  obligation  to  consider  the  bankruptcy  laws  does  not  supersede,  but  rather  is  an  integral  part  of,  the  Commissions  public  interest  analysis.  862  And,  they 
 emphatically  dispute  DIRECTVs  assertions  that  the  proposed  transactions  have  anticompetitive  effects.  863 


 282.  Discussion.  Facilitating  the  successful  resolution  of  a  bankruptcy  proceeding  is  a  factor  in  our  analysis  of  potential  public  interest  benefits.  Both  the  Applicants  and  DIRECTV  acknowledge  as 
 much,  864  and  the  Commission  has  so  indicated  in  previous  decisions.  865 
 283.  We  agree  with  DIRECTV,  however,  that  the  Commissions  public  interest  inquiry  under  section  310(  d)  is  in  no  way  superseded  by  an  obligation  to  refrain  from  disturbing  the  resolution  of  the 


 bankruptcy  court  proceedings.  The  bankruptcy  court  considers  whether  the  Adelphia  transactions  would  maximize  benefits  to  creditors.  866  The  Commission  has  a  mandate  to  evaluate  whether  these  transactions 
 would  frustrate  or  promote  the  aims  of  the  Communications  Act,  including  the  goals  of  preserving  and  enhancing  competition  in  relevant  markets,  accelerating  private  sector  deployment  of  advanced  services, 
 and  managing  spectrum  in  the  public  interest.  The  principal  duty  of  the  proponents  of  Adelphias  plan  to  emerge  from  bankruptcy  is  to  maximize  creditor  recovery.  These  aims  are  not  congruent,  although  they 
 are  not  necessarily  in  opposition. 
 284.  Often  the  competitive  landscape  is  little  changed  by  license  transfers  from  a  debtor-  in-possession.  For  example,  the  debtor-  in-  possession  frequently  transfers  its  licenses  to  itself  as  the 


 reorganized  entity.  867  The  effect  on  competition  in  such  cases  is  minimal,  and  there  is  no  need  for  an  extensive  balancing  of  potential  competitive  harms  against  the  benefits  of  facilitating  the  debtors 
 emergence  from  bankruptcy.  868  The  transactions  before  us,  however,  are  more  complicated  than  an 
 862  Applicants  Reply  at  21. 
 863  Id.  at  22-  23. 
 864  See,  e.  g.,  Id.  at  21  (obligation  to  consider  the  bankruptcy  laws  is  an  integral  part  of  the  Commissions  Section 
 310(  d)  public  interest  analysis);  DIRECTVs  Comments  at  35  (Commission  has  an  obligation  to  consider  the  national  policies  underlying  the  bankruptcy  laws). 


 865  As  the  Commission  stated  in  the  WorldCom/  MCI  Transfer  Order,  facilitating  a  telecommunications  service 
 providers  successful  emergence  from  bankruptcy  advances  the  public  interest  by  providing  economic  and  social  benefits,  especially  including  the  compensation  of  innocent  creditors.  WorldCom,  Inc.  and  its  Subsidiaries, 


 (debtors-  in-  possession),  Transferor,  and  MCI,  Inc.,  Transferee,  Applications  to  Transfer  and/  or  Assign  Section  214  Authorizations,  Section  310  Licenses,  and  Submarine  Cable  Landing  Licenses,  18  FCC  Rcd  26484,  26503    29 
 (2003)  (  WorldCom/  MCI  Transfer  Order).  866 
 See  Order  Establishing  New  Confirmation  Procedures  and  Deadlines  and  Approving  Supplemental  Disclosure,  (Bankr.  S.  D.  N.  Y.  June  8,  2006). 


 867  One  example  is  the  WorldCom/  MCI  Transfer  Order.  Similar  recent  examples  include  Application  of  Orbital 
 Communications  Corporation  and  ORBCOMM  Global,  L.  P.,  Assignors,  for  Consent  to  Assign  Non-  Common  Carrier  Earth  and  Space  Station  Authorizations,  Experimental  Licenses  and  VSAT  Network  to  ORBCOMM  License 


 Corp.  and  ORBCOMM  LLC,  Assignees,  17  FCC  Rcd  4496  (IB  2002)  (  ORBCOMM  Transfer  Order)  (approved  transfer  to  company  controlled  by  new  investors;  no  change  in  business);  Applications  of  Space  Station  System 
 Licensee,  Inc.,  Assignor,  and  Iridium  Constellation  LLC,  Assignee,  et  al.,  for  Consent  to  Assignment  of  License,  17  FCC  Rcd  2271  (2002)  (same);  Sirius  Satellite  Radio  Inc.  Application  for  Transfer  of  Control  of  Station 
 Authorization,  18  FCC  Rcd  215  (2003)  (approved  transfer  to  continuing  company  following  change  in  ownership;  no  change  in  business). 


 868  In  the  ORBCOMM  Transfer  Order,  for  example,  the  Bureau  noted  that  the  new  investors  held  no  significant 
 investments  in  telecommunications  firms  that  provide  telecommunications  services  in,  to  or  from  the  United  States,  so  the  transaction  would  not  lessen  competition  in  any  relevant  product  or  geographic  markets.  ORBCOMM 


 Transfer  Order,  17  FCC  Rcd  4496,  4504    14-  15.  To  the  contrary,  if  ORBCOMM  did  not  emerge  from  bankruptcy,  domestic  and  international  telecommunications  markets  might  lose  a  competitor  that  could  make 
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 infusion  of  new  capital  and  ownership  interests  that  enable  an  existing  business  to  continue.  Pursuant  to  the  proposed  transactions,  the  debtor,  Adelphia,  would  cease  to  exist  as  a  major  independent  cable 
 operator,  and  two  large  participants  in  the  MVPD  market  would  acquire  the  majority  of  its  cable  systems.  Furthermore,  the  acquiring  companies  are  also  transferring  existing  cable  systems  between  themselves  for 
 purposes  unrelated  to  Adelphias  bankruptcy  proceedings.  The  benefits  of  resolving  the  Adelphia  bankruptcy  are  only  tangentially  related  to  the  transactions  between  the  other  two  Applicants.  Thus, 
 while  we  recognize  the  benefit  of  bringing  an  end  to  the  Adelphia  bankruptcy,  it  is  simply  a  part  of  our  overall  public  interest  analysis  of  these  complex,  multi-  part  transactions. 


 285.  We  disagree  with  DIRECTV  that  we  should  disregard  the  benefit  of  resolving  the  Adelphia  bankruptcy  by  means  of  these  transactions  because  of  the  possibility  that  other  transactions 
 could  have  permitted  Adelphia  to  emerge  from  bankruptcy  with  fewer  competitive  concerns,  perhaps  even  as  a  stand-  alone  entity.  869  As  discussed  above,  pursuant  to  the  language  of  section  310(  d),  the 
 Commission  must  examine  whether  the  transactions  before  it  will  serve  the  public  interest  without  regard  to  other  possible  transactions.  870  Thus,  we  will  not  speculate  about  the  competitive  effects  of  other 
 hypothetical  transactions.  Finally,  we  do  not  find  that  the  Applicants  relied  on  a  failing  firm  defense  to  justify  possible  competitive  harms  caused  by  the  transactions.  The  Applicants  specifically  deny  that  they 
 rely  on  such  a  defense.  871  They  maintain  that  no  such  justification  is  needed,  because  the  proposed  transactions  would  not  cause  anticompetitive  effects.  872 


 286.  We  conclude  that  the  resolution  of  Adelphias  bankruptcy  proceeding  would  provide  a  public  interest  benefit  insofar  as  it  would  compensate  creditors  and  other  stakeholders,  and  avoid  the 
 considerable  expense  associated  with  arranging  an  alternative  disposition  of  Adelphias  assets.  We  recognize  this  benefit  as  we  conduct  the  public  interest  review  of  the  transactions,  but  we  do  not  give  this 


 (Continued  from  previous  page)  available  efficient  telecommunications  services  to  much  of  the  worlds  unserved  and  underserved  markets.  Id.  By 
 contrast,  in  recent  transfer  orders  following  bankruptcies  where  the  new  ownership  interests  were  held  by  telecommunications  companies  (or  by  firms  that  had  interests  in  telecommunications  companies),  the  Commission 
 has  conducted  a  more  extensive  public  interest  analysis.  See,  e.  g.,  Applications  for  Consent  to  the  Assignment  of  Licenses  Pursuant  to  Section  310(  d)  of  the  Communications  Act  from  Urban  Comm-  North  Carolina,  Inc.,  debtor-  in-possession, 
 to  Cellco  Partnership  d/  b/  a  Verizon  Wireless,  20  FCC  Rcd  10440  (WTB  2005);  Applications  of  XO  Communications,  Inc.  for  Consent  to  Transfer  Control  of  Licenses  and  Authorizations  Pursuant  to  Sections  214  and 
 310(  d)  of  the  Communications  Act  and  Petition  for  Declaratory  Ruling  Pursuant  to  Section  310(  b)(  4)  of  the  Communications  Act,  17  FCC  Rcd  19212  (IB  2002). 


 869  See  DIRECTV  Comments  at  34-  35.  There  were  other  bids  for  the  cable  system  assets  of  the  Adelphia  estate. 
 Adelphia  received  15  bids  for  the  acquisition  or  recapitalization  of  the  company  in  its  entirety,  or  the  acquisition  of  one  or  more  clusters  of  assets.  An  additional  bid  for  the  entire  company  was  submitted  after  the  bidding  deadline. 


 Debtors  Fourth  Amended  Disclosure  Statement  Pursuant  to  Section  1125  of  the  Bankruptcy  Code,  Nov.  21,  2005,  at  247.  Although  the  transactions  before  us  are  said  to  offer  the  debtor-  in-  possession  more  money  than  the 
 alternatives,  we  recognize  that  they  are  not  the  only  way  in  which  the  Adelphia  bankruptcy  proceeding  could  be  resolved. 


 870  The  Commission  may  not  consider  whether  the  public  interest,  convenience,  and  necessity  might  be  served  by 
 the  transfer,  assignment,  or  disposal  of  the  permit  or  license  to  a  person  other  than  the  proposed  transferee  or  assignee.  47  U.  S.  C.    310(  d);  see  also  Global  Crossing  Ltd  (debtor-  in-  possession),  Transferor,  and  GC 


 Acquisition  Limited,  Transferee,  Applications  for  Consent  to  Transfer  Control  of  Submarine  Cable  Landing  Licenses,  Intl  and  Domestic  Section  214  Authorizations,  and  Common  Carrier  and  non-  Common  Carrier  Radio 
 Licenses,  and  Petition  for  Declaratory  Ruling  Pursuant  to  Sections  310(  b)(  4)  of  the  Communications  Act,  18  FCC  Rcd  20301,  20330    37  (2003)  (stating  that  the  bankruptcy  court  approved  the  proposed  transaction  currently 
 before  us,  and  we  will  not  speculate  on  what  other  transactions  the  court  might  or  might  not  have  approved).  871 
 Applicants  Reply  at  22  n.  75.  872 
 Id.  at  22-  23. 
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 benefit  the  same  weight  we  might  if  the  transactions  before  us  related  solely  to  the  sale  of  the  debtors  assets  or  if  these  transactions  were  the  only  way  to  resolve  Adelphias  bankruptcy  proceeding. 
 4.  Unwinding  of  Comcasts  Interests  in  Time  Warner  Cable  and  Time  Warner  Entertainment,  L.  P. 
 287.  Prior  to  Comcasts  acquisition  of  AT&  T,  AT&  T  owned  a  27.64%  limited  partnership  interest  (the  TWE  Interest)  in  Time  Warner  Entertainment,  L.  P.  (  TWE)  and  Time  Warner  Inc.  held 
 the  remaining  72.36%.  TWE  was  formed  in  1992  to  own  and  operate  substantially  all  of  the  businesses  of  Warner  Bros.,  Inc.,  HBO,  and  the  cable  television  systems  owned  and  operated  by  Time  Warner  prior 
 to  that  time.  TWE  owned  cable  systems  serving  11.32  million  subscribers  and  managed  systems  owned  by  Time  Warner  outside  of  TWE  that  served  an  additional  1.48  million  subscribers;  TWE  was  the  second 
 largest  MVPD  after  AT&  T.  AT&  T  acquired  the  TWE  Interest  through  its  acquisition  of  MediaOne  Group,  Inc.  873 


 288.  The  Commission  conditioned  its  approval  of  Comcasts  acquisition  of  AT&  T  by  requiring  that  Comcast  and  AT&  T  adequately  insulate  the  TWE  Interest  from  the  newly  merged  company 
 by  (a)  placing  the  TWE  Interest  in  a  divestiture  trust  (the  TWE  Trust),  (b)  placing  any  non-  cash  assets  into  the  TWE  Trust  if  the  TWE  restructuring  (  TWE  Restructuring)  took  place,  874  (c)  ultimately 
 divesting  itself  of  the  TWE  Interest,  and  (d)  abiding  by  the  restrictions  set  forth  in  Appendix  B  of  the  Comcast-  AT&  T  Order.  875  The  Comcast-  AT&  T  Order  requires  the  trustee  of  the  TWE  Trust  to  divest  the 
 TWE  Interest  no  later  than  five  years  from  the  closing  of  the  Comcast-  AT&  T  transaction.  876  Following  the  closing  of  the  Comcast-  AT&  T  transaction,  as  anticipated,  the  TWE  Restructuring  took  place  and,  as  a 
 result,  the  TWE  Trust  received  non-  cash  consideration  in  the  form  of  stock  of  a  newly-  formed  company,  Time  Warner  Cable,  Inc.  (  Time  Warner  Cable).  877 


 289.  If  the  proposed  transactions  are  approved,  the  TWE  Interest  will  be  unwound  by  the  redemption  of  Comcasts  interests  in  Time  Warner  Cable  and  TWE  in  exchange  for  subsidiaries  holding 
 certain  cable  systems  and  cash.  878  The  Applicants  claim  that  the  divestiture  of  the  TWE  Interest  (which  now  includes  stock  of  Time  Warner  Cable)  is  a  public  interest  benefit  that  the  Commission  should 
 recognize  in  considering  the  proposed  transactions,  because  the  divestiture  would  be  realized  two  years  earlier  than  if  the  TWE  Trust  remains  the  legal  owner  of  the  TWE  Interest  for  the  full  five-  year  term  of 
 the  TWE  Trust.  879  The  Applicants  note  that  the  TWE  Interest,  which  has  been  passed  to  Comcast  from  US  West  as  a  result  of  a  transaction  that  occurred  12  years  ago,  has  long  been  disfavored,  and  the 
 Commission  has  before  it  an  opportunity,  by  granting  the  Applications,  to  facilitate  the  unwinding  of  the  TWE  Interest  before  the  required  divestiture  date.  880  In  addition,  they  assert  that  the  proposed  divestiture 


 873  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23258-  59    38. 
 874  The  TWE  Restructuring  transformed  the  TWE  Interest  from  a  purely  limited  partnership  interest  in  Time  Warner 
 Entertainment,  L.  P.  into  a  mix  of  shares  of  Time  Warner  Inc.,  shares  of  Time  Warner  Cable,  Inc.  (which  itself  held  95%  of  a  newly  restructured  TWE),  and  $2.  1  billion  in  cash  that  was  immediately  distributed  to  Comcast.  See 


 Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23273-  75    73-  77.  875 
 Id.  at  17  FCC  Rcd  at  23331    225  (Appendix  B  of  the  Comcast-  AT&  T  Order  sets  forth  certain  safeguards  and  enforcement  mechanisms  requiring  Comcast  to  refrain  from  involvement  in  or  communications  concerning  the 


 video  programming  activities  of  (i)  TWE,  (ii)  Texas  Cable  Partners,  and  (iii)  Kansas  City  Cable  Partners  or  any  successor  firms). 
 876  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23273    72. 
 877  Id.  at  17  FCC  Rcd  23274    74.  Comcast  retained  a  17.  9%  equity  interest  in  Time  Warner  Cable  as  a  consequence 
 of  the  TWE  Restructuring.  878 
 Public  Interest  Statement  at  2.  879 
 Id.  at  67.  880 
 Id.  at  66-  67. 
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 of  the  TWE  Interest  would  ensure  that  the  parties  realize  fair  value  from  the  disposition  of  the  investment,  a  result  that  the  Applicants  argue  the  Commission  expressly  recognized  as  important  to  the 
 accomplishment  of  public  interest  goals  in  the  Comcast-  AT&  T  Order.  881  The  Applicants  further  contend  that  the  grant  of  the  applications  would  reduce,  rather  than  increase,  media  ownership  concerns  by 
 expeditiously  unwinding  the  TWE  Interest,  because  the  TWE  Interest  would  no  longer  be  associated  with  Comcast.  882 


 290.  DIRECTV  and  CWA/  IBEW  counter  that  Comcasts  divestiture,  or  more  appropriately,  the  trustees  divestiture,  of  the  TWE  Interest  is  not  a  cognizable  benefit.  They  allege  that  it  is  not 
 transaction-  specific,  as  there  are  other  ways  in  which  Comcast  could  divest  those  interests  and  do  so  without  anticompetitive  effects.  They  argue  that,  in  this  case,  divestiture  is  not  a  free-  standing  public 
 interest  benefit,  but  rather  a  pre-  existing  obligation  imposed  on  Comcast  in  order  to  avoid  potential  harm  to  competition  and  diversity  in  video  programming  that  would  otherwise  have  resulted  from  its 
 acquisition  of  AT&  T.  Further,  the  opponents  allege  that  the  transactions  would  not  divest  Comcast  of  its  direct  voting  interest  in  Time  Warner,  which  would  remain  subject  to  the  trust  and  divestiture 
 requirements,  and  the  transactions  would  not  reduce  reporting  and  monitoring  conditions  the  Commission  has  placed  on  both  Applicants.  883 


 291.  The  Applicants  respond  that  the  Commission  has  recognized  the  complexities  associated  with  the  divestiture.  They  represent  that,  because  the  TWE  Interest  is  being  voluntarily  unwound  by  the 
 parties  now,  rather  than  through  a  forced  sale  at  the  end  of  the  divestiture  period,  the  proposed  transactions  in  and  of  themselves  are  a  public  benefit.  They  further  allege  that  but  for  the  transactions, 
 divestiture  would  not  likely  occur  until  the  end  of  the  specified  period.  884 
 292.  Discussion.  We  agree  with  DIRECTV  and  CWA/  IBEW  that  although  the  unwinding  of  the  TWE  Interest  is  a  public  interest  benefit,  it  is  not  a  benefit  that  derives  from  the  instant  transactions. 


 The  Commission  accounted  for  the  benefit  associated  with  the  divestiture  of  the  TWE  Interest  when  it  conditioned  its  approval  of  the  Comcast-  AT&  T  transaction  thereon.  The  Applicants  have,  therefore, 
 already  received  the  benefit  of  their  agreement  to  divest  the  TWE  Interest. 
 293.  We  likewise  reject  the  Applicants  suggestion  that  unwinding  the  TWE  Interest  as  part  of  the  instant  transactions  rather  than  at  the  end  of  the  term  of  the  TWE  Trust  is  a  public  interest  benefit.  885 


 The  Applicants  confuse  a  divestiture  by  the  Applicants  and  a  divestiture  by  the  TWE  Trust.  The  assets  were  divested  by  Comcast  when  the  Comcast-  AT&  T  transaction  closed.  The  trustee  now  has  title  to  the 
 assets.  It  is  for  the  trustee  to  decide  when  to  divest  the  assets  in  accordance  with  the  terms  of  the  TWE  Trust,  not  the  Applicants.  886  Accordingly,  the  Applicants  suggestion  that  absent  the  transaction  a 
 divestiture  would  not  occur  prior  to  the  end  of  the  term  of  the  TWE  Trust  implies  that  the  Applicants,  and  not  the  trustee,  control  the  timing  of  any  divestiture.  It  also  suggests  a  lack  of  independence  on  the  part  of 
 the  trustee,  something  we  assume  that  the  Applicants  did  not  mean  to  imply. 


 881  Id.  at  67. 
 882  Id. 
 883  DIRECTV  Comments  at  41-  42,  CWA/  IBEW  Reply  Comments  at  2.  The  Trustee  of  the  TWE  Trust  has  advised 
 that,  as  of  the  quarter  ending  December  31,  2005,  the  TWE  Trust  holds  57,000,  000  shares  of  the  common  stock  of  Time  Warner  Inc.  This  represents  approximately  1.27%  of  the  issued  and  outstanding  common  stock  of  Time 


 Warner  Inc.  While  the  transactions  before  us  will  not  dispose  of  this  part  of  the  TWE  Interest,  it  is  de  minimis  and  does  not  affect  our  conclusions  herein.  Letter  from  Anita  L.  Wallgren,  Sidley  Austin,  LLP,  to  Marlene  H.  Dortch, 
 Secretary,  FCC  (May  9,  2006)  at  1-  2.  884 
 Applicants  Reply  at  24.  885 
 Id.  886 
 Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23271-  72    70. 
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 IX.  BALANCING  PUBLIC  INTEREST  HARMS  AND  BENEFITS 
 294.  The  Commission  has  evaluated  separately  the  potential  public  interest  harms  and  benefits  of  the  proposed  transactions.  We  now  weigh  the  potential  harms  against  the  potential  benefits  to 


 determine  if,  on  balance,  the  proposed  transactions  serve  the  public  interest,  convenience,  and  necessity.  887  We  find,  on  balance,  the  public  interest  will  be  served  by  approval  of  the  Applications 
 subject  to  the  conditions  we  impose  herein. 
 295.  Potential  Harms.  Based  on  our  review  of  the  record,  we  find  that  the  transactions  may  increase  the  likelihood  of  harm  in  markets  in  which  Comcast  or  Time  Warner  now  hold,  or  may  in  the 


 future  hold,  an  ownership  interest  in  RSNs,  which  ultimately  could  increase  retail  prices  for  consumers  and  limit  consumer  MVPD  choice.  Specifically,  we  find  that  the  transactions  would  enable  Comcast  and 
 Time  Warner  to  raise  the  price  of  access  to  RSNs  by  imposing  uniform  price  increases  applicable  to  all  MVPDs,  including  their  own  systems.  Such  a  strategy  is  likely  to  result  in  increased  retail  rates  and 
 fewer  choices  for  consumers  seeking  competitive  alternatives  to  Comcast  and  Time  Warner.  Moreover,  it  is  likely  to  hamper  new  entrants  in  their  efforts  to  obtain  must  have  sports  programming. 


 296.  As  noted  previously,  our  program  access  rules  do  not  prohibit  nondiscriminatory  price  increases.  While  a  price  increase  imposed  on  an  RSNs  affiliated  MVPD  would  have  no  actual  cost 
 effect,  higher  rates  imposed  on  DBS  operators  or  other  competing  MVPDs  would  result  in  higher  prices  and  fewer  alternatives  for  consumers.  Our  evidence  indicates  that  a  large  number  of  consumers  will 
 refuse  to  purchase  DBS  service  if  the  provider  cannot  offer  RSNs.  Therefore,  DBS  providers  or  other  competing  MVPDs  will  be  willing  to  pay  a  high  price  to  obtain  RSN  programming.  As  a  result,  uniform 
 price  increases  for  RSNs  likely  will  lead  to  DBS  providers  raising  consumer  fees  or  offering  fewer  services. 


 297.  The  arbitration  conditions  imposed  herein  are  intended  to  constrain  Comcasts  and  Time  Warners  incentives  to  increase  rates  for  RSN  programming  uniformly  or  otherwise  disadvantage  rival 
 MVPDs  using  anticompetitive  strategies.  In  addition,  with  respect  to  program  access,  the  condition  is  intended  to  provide  protection,  if  necessary,  against  permanent  foreclosure,  temporary  foreclosure,  and 
 stealth  discrimination.  For  disputes  related  to  access  to  RSN  programming,  the  arbitration  and  program  access  conditions  apply  to  any  RSN,  regardless  of  the  means  of  delivery,  that  is  currently  managed  or 
 controlled  by  Comcast  or  Time  Warner  and  prohibit  Comcast  or  Time  Warner  from  acquiring  an  attributable  interest  in,  an  option  to  purchase  an  attributable  interest  in,  or  one  that  would  permit 
 management  or  control  of  an  RSN  during  the  period  of  the  conditions  set  forth  in  Appendix  B  if  the  RSN  is  not  obligated  to  abide  by  the  conditions.  888  We  also  condition  our  approval  of  the  transactions  on  a 
 prohibition  against  the  use  of  exclusive  contracts  or  other  behaviors  proscribed  by  the  Commissions  program  access  rules  with  respect  to  Comcasts  and  Time  Warners  affiliated  RSNs,  regardless  of  the 
 means  of  delivery. 
 298.  In  addition,  we  conclude  that  the  transactions  will  increase  Comcasts  and  Time  Warners  incentive  and  ability  to  deny  carriage  to  unaffiliated  RSNs,  and  also  may  create  public  interest  harms  with 


 respect  to  the  carriage  of  unaffiliated  national  and  non-  sports  regional  programming.  Our  condition  permitting  the  use  of  arbitration  to  resolve  disputes  involving  commercial  leased  access  mitigates 
 potential  public  interest  harms  identified  by  commenters.  The  program  carriage  arbitration  condition  we  adopt  will  alleviate  the  potential  harms  to  viewers  who  are  denied  access  to  valuable  RSN  programming 
 during  protracted  carriage  disputes. 
 299.  Potential  Benefits.  We  conclude  that  the  transactions  likely  will  result  in  the  accelerated  deployment  of  VoIP  service  and  advanced  video  services,  such  as  local  VOD  programming,  in  Adelphia 


 887  See  47  U.  S.  C.    310(  d).  See  also  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  624    358;  Comcast-  AT&  T  Order, 
 17  FCC  Rcd  at  23329    215.  888 
 As  noted  in  Section  VI.  D.  1.  supra,  Comcast  SportsNet  Philadelphia  is  covered  only  in  part  by  these  conditions. 
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 markets.  We  also  find  that  the  transactions  will  facilitate  the  resolution  of  the  bankruptcy  proceeding.  However,  we  conclude  that  the  Applicants  have  not  provided  sufficient  information  to  show  that  post-transaction 
 the  Applicants  will  improve  or  further  deploy  high-  speed  Internet  service  to  Adelphia  subscribers.  In  addition,  while  we  find  that  the  increased  clustering  may  result  in  synergies  and  cost 
 saving  efficiencies  for  the  Applicants,  we  conclude  that  the  Applicants  have  failed  to  quantify  sufficiently  or  verify  the  cost  savings  or  adequately  explain  how  the  cost  savings  will  flow  through  to  consumers.  We 
 also  conclude  that  the  increased  clustering  is  not  likely  to  enhance  competition  with  LECs  for  the  provision  of  the  triple  play  of  services  (video,  voice,  and  data).  Finally,  we  conclude  that  Comcasts 
 unwinding  of  its  TWE  interest  is  not  a  transaction-  specific  benefit. 
 300.  Balancing.  As  noted  in  Section  VIII.  A,  in  balancing  the  public  interest  harms  and  benefits,  we  employ  a  sliding  scale  approach.  Under  that  approach,  we  examine  the  likelihood  and  the 


 magnitude  of  the  potential  public  interest  harms.  Here,  we  find  that  the  proposed  transactions,  as  conditioned,  will  not  likely  result  in  potential  public  interest  harms.  We  also  find  that  the  transactions 
 will  result  in  some  public  interest  benefits,  particularly,  the  accelerated  deployment  of  VoIP  service  and  advanced  video  services  in  Adelphias  markets.  Accordingly,  after  reviewing  the  record  and  weighing  the 
 potential  harms  against  the  potential  benefits,  we  conclude  that,  on  balance,  the  proposed  transactions,  as  conditioned,  would  serve  the  public  interest,  convenience,  and  necessity. 


 X.  PROCEDURAL  MATTERS 
 A.  City  of  San  Buenaventura  Petition  to  Condition  Approval 
 301.  Numerous  local  franchising  authorities  (  LFAs)  have  jurisdiction  in  the  areas  where  the  Applicants  provide  service.  Pursuant  to  section  617  of  the  Act,  LFAs  whose  franchise  agreements  require 


 LFA  approval  of  the  sales  of  cable  systems  have  120  days  from  the  date  of  the  Applicants  request  for  a  franchise  transfer  to  render  a  decision.  889  The  Applicants  represent  that  as  of  March  31,  2006,  the  transfer 
 of  3,268  cable  franchises  (equivalent  to  99.1%  of  the  affected  franchises,  according  to  the  Applicants)  had  been  approved  or  did  not  require  approval.  In  addition,  The  Applicants  reported  that  several  of  their 
 franchise  transfer  applications  had  been  denied,  without  prejudice,  and  that  the  Applicants  continue  to  seek  approval  in  those  communities.  890 


 302.  City  of  San  Buenaventura  objects  to  the  Applications  on  the  grounds  that  they  seek  approval  for  assignment  of  CARS  licenses  891  without  referencing  the  necessary  local  approvals  needed  to 
 transfer  the  underlying  cable  systems.  892  Citing  the  staff  decision  in  Letter  to  Jill  Abeshouse  Stern  as 


 889  See  47  U.  S.  C.    537;  47  C.  F.  R.    76.  502.  A  cable  operator  must  obtain  local  franchising  authority  approval  for 
 the  transfer  or  sale  of  its  cable  system  only  if  the  franchise  agreement  so  requires.  47  U.  S.  C.    537.  890 
 The  Applicants  report  that  the  following  jurisdictions  denied  their  franchise  transfer  applications,  without  prejudice,  in  California,  City  of  Hermosa  Beach;  in  North  Carolina,  Town  of  Bailey,  Town  of  Cornelius;  Town  of 


 Davidson;  Town  of  Dortches;  Town  of  Huntersville;  Mecklenburg  County;  Town  of  Middlesex;  Town  of  Mooresville;  Nash  County;  Pitt  County;  Town  of  Spring  Hope;  Town  of  Troutman;  Town  of  Whitakers;  and  in 
 Virginia,  Henry  County.  Upon  approval,  the  Applicants  state  that  all  of  the  referenced  franchises  would  be  held  by  Time  Warner  affiliates,  with  the  exception  of  Henry  County,  Virginia,  which  would  be  held  by  a  Comcast  affiliate. 
 See  Letter  from  James  R.  Coltharp,  Comcast  Corp.,  Steven  N.  Teplitz,  Time  Warner  Inc.,  and  Michael  H.  Hammer,  Willkie  Farr  &  Gallagher,  LLP,  Counsel  for  Adelphia  Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary, 
 FCC  (July  12,  2006)  at  1-  2;  see  also  Letter  from  James  R.  Coltharp,  Comcast  Corp.,  Steven  N.  Teplitz,  Time  Warner  Inc.,  and  Michael  H.  Hammer,  Willkie  Farr  &  Gallagher,  LLP,  Counsel  for  Adelphia  Communications 
 Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Mar.  31,  2006)  at  1-  2.  891 
 See  Public  Interest  Statement  at  Ex.  P.  892 
 City  of  San  Buenaventura  Petition  at  1-  2.  Century-  TCI  California,  L.  P.,  the  cable  franchisee  in  Ventura,  is  a  partnership  of  Adelphia  and  Comcast  that  Adelphia  controls.  City  of  San  Buenaventura  represents  that  the  franchise 


 agreement  precludes  any  assignment  or  transfer  of  the  franchise,  or  any  change  in  ownership  of  the  franchisees  parent  corporation,  without  the  prior  written  consent  of  the  City  of  San  Buenaventura.  It  states  that  it  has  requested 
 (continued.) 
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 precedent,  City  of  San  Buenaventura  urges  the  Commission  to  condition  its  approval  of  the  Applications  on  the  approval  of  the  relevant  franchising  authorities  for  the  transfer  of  the  franchise  rights  for  the 
 underlying  cable  systems.  893 
 303.  The  Applicants  counter  that  a  condition  restricting  transfer  of  the  cable  systems  pending  LFA  review  is  unwarranted  for  several  reasons.  First,  they  take  issue  with  application  of  Stern  to  the 


 transactions  at  hand.  They  assert  that  the  decision,  issued  in  1989  at  the  Bureau  level,  holds  only  that  approval  of  a  CARS  transfer  or  assignment  application  is  not  dependent  upon  prior  local  approval.  894 
 Applicants  add  that  imposing  such  a  condition  on  the  instant  transactions  would  be  impractical  given  the  complexity  of  the  transactions  and  the  need  for  multiple  local,  state,  and  federal  agencies  to  grant 
 approval.  895  Finally,  the  Applicants  contend  that  there  are  no  CARS  facilities  to  be  transferred  in  the  transactions  that  provide  service  to  the  City  of  San  Buenaventura  and  therefore  Commission  approval 
 cannot  be  conditioned  on  the  citys  LFA  review.  896 
 304.  Discussion.  Both  the  Applicants  and  the  City  of  San  Buenaventura  use  Stern  to  buttress  their  arguments.  The  Applicants  argue  that  Commission  grant  of  the  CARS  licenses  is  permissive  in 


 nature  and  not  dependent  on  prior  approval  by  an  LFA  to  the  transfer  of  the  local  cable  system  franchise.  The  City  of  San  Buenaventura  contends  that,  notwithstanding  the  permissive  nature  of  the  Commissions 
 authorizations,  in  Stern  the  Bureau  recognized  the  rights  of  LFAs  to  approve  by  prohibiting  the  consummation  of  the  underlying  transactions  until  the  LFA  approved  the  transfer  of  the  underlying 
 franchise.  As  the  Bureau  indicated  in  Stern,  the  Commissions  approval  of  a  CARS  assignment  application  does  not  circumvent  the  local  franchise  approval  process  in  any  way.  897  Nonetheless,  in 
 granting  the  single  CARS  application  at  issue  in  that  case,  the  Bureau  chose  to  impose  a  condition  that  the  transaction  not  be  consummated  until  the  local  franchise  authority  approved  the  transfer  of  the  franchise 
 for  the  underlying  cable  system.  898  In  view  of  the  numerous  CARS  licenses  and  authorizations  affected  by  the  transactions  under  review  herein,  we  deem  such  an  approach  impractical.  Numerous  LFAs  must 
 approve  the  transfers  of  Adelphias  systems  to  Comcast  and  Time  Warner,  as  well  as  transfers  between  Time  Warner  and  Comcast.  To  condition  our  approval  on  the  completion  of  multiple  local  review 
 processes  would  not  benefit  the  smooth  processing  of  the  Applications  at  the  federal  level.  899  Were  we  to 
 (Continued  from  previous  page)  additional  information  from  the  franchisee  and  the  transferee  and,  if  it  does  not  approve  the  transfer  of  the 


 underlying  cable  system,  the  assignment  of  the  accompanying  four  CARS  licenses  would  be  pointless.  Id.  at  2-  4.  In  this  regard,  we  note  the  ex  parte  submission  from  the  Attorney  General  of  the  State  of  Maine  seeking  denial  of  the 
 transfer  or  assignment  to  Time  Warner  of  any  Adelphia  CARS  or  TVRO  Earth  Station  licenses  based  on  the  Attorney  Generals  concern  that  approval  of  the  transactions  will  reduce  competition  in  the  relevant  Maine  markets, 
 particularly  rural  areas.  See  Maine  Attorney  General  Ex  Parte  at  1-  5.  893 
 City  of  San  Buenaventura  Petition  at  4-  5  (stating  that  conditional  approval  of  the  CARS  license  transfers  will  help  the  LFAs  to  avoid  disruption  in  cable  service).  See  Stern,  4  FCC  Rcd  at  5061. 


 894  Applicants  Reply  at  96. 
 895  Id.  The  Applicants  further  argue  that  the  120-  day  LFA  review  process  as  provided  for  in  Section  617  of  the 
 Communications  Act  will  likely  expire  before  the  Commission  rules  on  the  Applications,  thus  eliminating  the  need  for  any  additional  delay.  Id.  at  97. 


 896  Id. 
 897  Stern,  4  FCC  Rcd  at  5062. 
 898  Id. 
 899  In  this  regard,  we  note  that  the  United  States  Bankruptcy  Court  for  the  Southern  District  of  New  York  has 
 ordered  Adelphia  to  prepare  a  Contract  Notice  for  LFAs  and  other  interested  parties.  These  Contract  Notices  would  identify  agreements,  contracts,  and  leases  to  be  retained  or  assigned  by  Adelphia  under  the  Reorganization 


 Plan  and  would  state  the  Cure  Amount  to  cure  any  defaults  and  compensate  LFAs  for  pecuniary  losses.  LFAs  will  have  the  opportunity  to  challenge  the  Contract  Notice  and  the  Cure  Amounts  proposed  by  Adelphia,  as  well  as  the 
 proposed  retention  or  assignment  of  cable  franchises  by  Adelphia.  See  In  re  Adelphia  Communications  (continued.) 
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 impose  such  a  condition,  the  Commission  would  be  placed  in  the  untenable  position  of  having  to  monitor  numerous  local  franchise  transfer  proceedings  and  any  associated  judicial  proceedings  to  determine  when 
 individual  licenses  may  be  transferred.  900 
 305.  Commission  rules  afford  the  Applicants  60  days  after  Commission  approval  of  the  license  transfers  to  consummate  the  underlying  transactions,  which  should  provide  them  adequate  time  to 


 secure  the  necessary  franchise  approvals.  901  If  the  Applicants  require  additional  time,  they  may  request  an  extension  of  the  60-  day  period.  902  As  discussed  previously  in  this  Order,  if  any  aspect  of  the  transactions 
 fails  to  transpire,  and  the  Commission  deems  that  aspect  material  to  its  public  interest  analysis,  it  may  warrant  re-  evaluation  of  the  transactions  based  on  those  developments.  903  If  the  Applicants  are  unable  to 
 obtain  the  necessary  LFA  approvals,  we  will  require  that  they  notify  the  Commission  in  writing  and  identify  the  communities  and  relevant  CARS  authorizations  for  the  related  franchise  transfer  applications 
 that  have  been  denied,  as  well  as  the  number  of  subscribers  attributable  to  the  cable  systems  in  those  communities.  904 


 306.  Moreover,  the  requested  condition  is  not  necessary  to  protect  the  integrity  of  the  local  transfer  review  process.  If  the  franchise  agreement  establishes  the  right  of  the  City  of  San  Buenaventura 
 or  any  other  LFA  to  approve  the  franchise  transfer,  Commission  approval  of  the  license  transfers  will  not  override  the  authority  of  the  City  of  Buenaventura,  and  it  can  enforce  its  right  with  or  without  the 
 requested  condition.  Accordingly,  we  decline  to  adopt  it. 
 B.  Free  Press  Motion  to  Hold  in  Abeyance 
 307.  On  October  31,  2005,  Free  Press  filed  a  Motion  to  Hold  in  Abeyance,  asking  the  Commission  to  hold  the  Adelphia  proceeding  in  abeyance  pending  the  filing  and  Commissions  review  of 


 then-  proposed  applications  for  the  transfer  of  Susquehanna  Cable  Companys  (  Susquehanna)  cable  systems  to  Comcast.  Free  Press  asserts  that  the  Commission  can  meaningfully  review  the  combined 
 effects  of  the  instant  transactions  and  the  Susquehanna  transfer  on  regional  concentration  only  if  it  considers  them  together.  Comcast  opposes  the  motion,  asserting  that  it  raises  issues  that  are  irrelevant 
 and  unrelated  to  the  transactions.  905  Further,  Comcast  states  that  grant  of  the  motion  would  effectively  deny  Applicants  a  fair  and  expeditious  review  of  their  long-  pending  Applications,  thereby  harming 
 Applicants  as  well  as  Adelphia  consumers  who  are  awaiting  the  benefits  that  the  proposed  Adelphia  Transactions  will  bring.  906 


 (Continued  from  previous  page)  Corporation,  et  al.,  Order  Pursuant  to  Sections  105(  a)  and  365  of  the  Bankruptcy  Code  Establishing  Procedures  to 
 Determine  Cure  Amounts  and  Deadlines  for  Objections  for  Certain  Assumed  Contracts  and  Leases  to  be  Retained,  Assumed  and/  or  Assigned  by  the  Debtors,  Case  No.  02-  41729  (Bankr.  S.  D.  N.  Y.  Oct.  14,  2005  (Gerber,  J.)). 


 900  See,  e.  g.,  Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23254    25  n.  55  (indicating  that  26  LFAs  had  not  consented  to 
 the  filed  transfer  applications  at  the  time  of  Commission  grant  of  the  merger  applications).  901 
 47  C.  F.  R.    78.35(  e).  902 
 Id.  903 
 47  C.  F.  R.    1.65(  a).  904 
 As  stated  supra  note  121,  we  expect  the  Applicants,  if  they  are  unable  to  consummate  the  transactions  as  granted  herein  consistent  with  Commission  rule,  47  C.  F.  R.    78.  35(  e),  to  file  a  request  for  extension  of  time  to  consummate. 


 Moreover,  if  the  failure  to  consummate  results  in  violation  of  a  Commission  rule,  the  Applicants  must  file  within  30  days  of  the  action  that  results  in  violation  of  the  rule(  s)  the  necessary  applications  to  remedy  the  violation. 
 905  Comcast  Opposition  to  Free  Press,  et  al.,  Motion  to  Hold  Proceeding  in  Abeyance,  MB  Docket  05-  192,  filed 
 Nov.  7,  2005,  (  Comcast  Opposition)  at  1;  see  also  Letter  from  James  R.  Coltharp,  Comcast  Corp.,  Steven  N.  Teplitz,  Time  Warner  Inc.,  and  Michael  H.  Hammer,  Willkie,  Farr  &  Gallagher,  LLP,  Counsel  for  Adelphia 


 Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Jan.  31,  2006)  at  4  n.  13.  906 
 Comcast  Opposition  at  3. 
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 308.  In  response  to  the  Commissions  information  request,  Comcast  filed  subscriber  data  pertaining  to  its  then-  30%  equity  interest  in  Susquehanna  Cable  Company.  907  Further,  on  December  20, 
 2005,  Comcast  filed  an  application  seeking  consent  for  the  acquisition  of  the  Susquehanna  cable  systems.  908  No  petitions  to  deny  or  other  comments  in  opposition  were  filed  regarding  the  transfer 
 application.  The  Media  Bureau  granted  the  application  and  approved  the  transfer  of  Susquehannas  cable  assets  to  Comcast  on  April  13,  2006,  during  the  pendency  of  this  proceeding.  909  Thus,  we  have  taken 
 account  of  and  attributed  to  Comcast  Susquehannas  226,117  subscribers  in  the  context  of  our  review  of  the  Applications,  including  the  effect  on  Comcasts  horizontal  reach.  Accordingly,  there  is  no  need  to 
 hold  the  Applications  in  abeyance  to  achieve  the  relief  that  Free  Press  desires.  Therefore,  we  deny  Free  Press  motion.  910 


 C.  TWE  and  Time  Warner  Cable  Redemption  Transactions 
 309.  Under  the  current  terms  of  the  trust  established  pursuant  to  the  Comcast-  AT&  T  Order,  any  non-  cash  consideration  received  by  the  trustee  in  return  for  trust  assets  is  to  remain  in  the  trust  unless 


 the  Commissions  Media  Bureau  approves  its  distribution  to  Comcast.  911  Pursuant  to  the  Time  Warner  Cable  Redemption  Agreement  and  TWE  Redemption  Agreement,  Comcast  is  to  acquire  the  ownership 


 907  See  Letter  from  Wayne  D.  Johnsen,  Wiley  Rein  &  Fielding,  LLP,  Counsel  for  Comcast  Corp.,  to  Marlene  H. 
 Dortch,  Secretary,  FCC  (Dec.  12,  2005).  908 
 Comcast  of  Southeast  Pennsylvania,  LLC,  CAR-  20051221AN-  08,  filed  Dec.  20,  2005.  Comcasts  application  states  that  it  agreed  to  acquire  all  of  Susquehanna  Cable  Companys  assets,  including  cable  systems  serving  nine 


 communities  in  six  different  states:  DuQuoin,  Illinois;  Olney,  Illinois;  Lawrenceburg,  Indiana;  Shelbyville,  Indiana;  Rankin  County,  Mississippi;  Brunswick,  Maine;  Carmel,  New  York;  Williamsport,  Pennsylvania;  and  York, 
 Pennsylvania.  Comcast  Opposition  at  2,  4.  This  referenced  lead  application  incorporates  the  authorizations  for  the  assignment  of  licenses  for  all  of  the  Susquehanna  cable  systems  in  the  foregoing  communities. 


 909  See  Public  Notice,  Rep.  No.  4035  (Apr.  26,  2006),  File  No.  CAR-  20051221AN-  08  (granted  Apr.  13,  2006) 
 (granting  the  assignment  of  authorization  for  call  sign  KB60120  from  York  Cable  Television,  Inc.  to  Comcast  of  Southeast  Pennsylvania,  LLC).  Comcast  filed  its  notification  of  consummation  with  the  Commission  on  May  2, 


 2006.  See  Letter  from  Steven  J.  Horvitz,  Cole,  Raywid  &  Braverman,  L.  L.  P.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (May  2,  2006)  (regarding  Comcast  of  Southeast  Pennsylvania,  LLC  (FRN  0003-  26-  4132)). 


 910  On  November  14,  2005,  Comcast  filed  a  Petition  for  Special  Relief  seeking  a  waiver  of  attribution  under  section 
 76.  503  note  2(  c)  of  the  Commissions  rules.  See  47  C.  F.  R.    76.  503  note  2(  c).  If  common  or  appointed  directors  or  officers  have  duties  and  responsibilities  that  are  wholly  unrelated  to  video  programming  activities  for  both  entities, 


 the  relevant  entity  may  request  the  Commission  to  waive  attribution  of  the  director  or  officer.  Id.  See  also  Cable  Attribution  Order,  14  FCC  Rcd  at  19042    68.  Comcast  explains  that  when  it  appointed  Robert  S.  Pick,  Senior  Vice 
 President    Corporate  Development  to  the  Board  of  Directors  of  Susquehanna  Cable  Company  approximately  six  years  ago  it  inadvertently  neglected  to  file  a  waiver  petition  pursuant  to  Commission  rule  47  C.  F.  R.    76.  503  note 
 2(  c).  Comcast  represents  that  Picks  duties  for  Comcast  were  solely  related  to  acquisitions  and  dispositions  of  properties  or  businesses  and  did  not  involve  the  video  programming  activities  for  Comcast.  Comcast  further  avers 
 that  the  Susquehanna  Board  of  Directors  does  not  address  video  programming  activities.  Comcasts  petition  for  special  relief  remains  pending  and  will  be  handled  separately.  On  June  22,  2006,  Comcast  filed  a  Motion  to  Dismiss 
 its  Petition  for  Special  Relief  (File  No.  CSR  6950-  X),  stating  that  the  Commissions  approval  of  the  assignment  of  Susquehanna  cable  systems  to  Comcast  rendered  the  attribution  issue  moot.  Comcast  indicated  that  it  completed  its 
 acquisition  of  the  Susquehanna  cable  systems  on  May  1,  2006,  and  all  Susquehanna  subscribers  are  now  fully  attributable  to  Comcast.  See  Letter  from  Michael  H.  Hammer,  Willkie  Farr  &  Gallagher,  LLP,  Counsel  for  Comcast 
 Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC  (June  22,  2006).  911 
 See  Agreement  and  Declaration  of  Trust,  by  and  among  MOC  Holdco  II,  Inc.,  Edith  E.  Holiday,  Trustee,  and  The  Capital  Trust  Company  of  Delaware,  Section  5(  e)  (dated  Mar.  31,  2003).  Such  assets  include  the  Time  Warner 


 Cable  and  TWE  interests  to  be  redeemed  pursuant  to  the  Time  Warner  Cable  Redemption  Transaction  and  the  TWE  Redemption  Transaction.  Public  Interest  Statement  at  5  n.  9;  see  also  Public  Interest  Statement  at  Ex.  P  (list  of 
 affected  FCC  licenses  and  authorizations  subject  to  pro  forma  assignments  and/  or  transfers  of  control  to  a  newly  formed  Time  Warner  subsidiary,  and,  thereafter,  control  of  the  entity  to  Comcast). 
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 interests  in  certain  entities  holding  cable  systems  and  related  assets  in  exchange  for  its  interests  in  Time  Warner  Cable  and  TWE.  Accordingly,  Comcast  seeks  approval  to  acquire  the  ownership  interests  of 
 these  directly  and  not  through  the  trust  upon  consummation  of  the  transactions.  912 
 310.  We  find  there  is  no  public  interest  reason  for  denying  Comcasts  request.  We  have  determined  above,  pursuant  to  a  full  public  interest  analysis,  that  approval  of  the  license  transfer 


 Applications  in  this  proceeding,  as  conditioned,  will  benefit  the  public  interest.  The  purpose  of  Section  5(  e)  of  the  trust  agreement  is  to  ensure  that  assets  acquired  by  the  trust  will  remain  in  trust  pending  a 
 review  by  the  Media  Bureau.  In  this  case,  the  Commission  has  reviewed  Comcasts  proposed  acquisition  of  cable  systems  currently  held  by  TWC  and  TWE.  These  acquisitions  represent  substantial  progress 
 toward  Comcasts  continuing  effort  to  unwind  the  TWE  Interest  in  compliance  with  the  Comcast-  AT&  T  Order.  Consistent  with  the  Commissions  intent  in  requiring  the  unwinding  of  the  TWE  Interest, 
 Comcasts  acquisition  of  the  TWC  and  TWE  systems  will  sever  the  joint  ownership  of  those  systems  by  Comcast  and  Time  Warner.  Because  we  have  found  that  Comcasts  acquisition  of  these  and  other 
 systems  subject  to  the  transactions  will  benefit  the  public  interest,  the  additional  regulatory  approval  required  by  Section  5(  e)  of  the  trust  agreement  is  unnecessary  and  would  serve  only  to  delay  ultimate 
 consummation  of  the  transactions,  without  any  concomitant  public  interest  benefit.  Accordingly,  we  grant  Comcasts  request. 


 XI.  ORDERING  CLAUSES 
 311.  Accordingly,  having  reviewed  the  Applications  and  the  record  in  this  matter,  IT  IS  ORDERED,  pursuant  to  sections  4(  i),  4(  j),  214(  a),  214(  c),  309,  and  310(  d)  of  the  Communications  Act  of 


 1934,  as  amended,  47  U.  S.  C.    154(  i),  154(  j),  214(  a),  214(  c),  309,  310(  d),  that  the  Applications  for  Consent  to  the  Assignment  and/  or  Transfer  of  Control  of  various  licenses  from  and/  or  between  Adelphia 
 Communications  Corp.,  Time  Warner  Cable,  Inc.,  and  Comcast  Corp.  ARE  GRANTED  subject  to  the  conditions  set  forth  herein  and  in  Appendix  B. 


 312.  IT  IS  FURTHER  ORDERED  that  the  above  grants  shall  include  authority  for  Comcast  and  Time  Warner  consistent  with  the  terms  of  this  Order  to  acquire  control  of  (a)  any  license  or 
 authorization  issued  for  any  system  that  is  part  of  these  transactions  during  the  Commissions  consideration  of  the  Applications  or  the  period  required  for  consummation  of  the  transactions,  (b) 
 construction  permits  held  by  such  systems  that  mature  into  licenses  after  closing,  (c)  applications  filed  by  such  systems  that  are  pending  at  the  time  of  consummation  of  the  transfers  of  control  or  assignments,  and 
 (d)  licenses  that  may  have  been  inadvertently  omitted  from  the  Applications  that  are  held  by  such  systems. 


 313.  IT  IS  FURTHER  ORDERED  that  approval  IS  CONDITIONED  as  set  forth  in  Sections  VI.  C-  D,  and  Appendix  B. 
 314.  IT  IS  FURTHER  ORDERED  that  within  60  days  after  consummation  of  the  transactions,  Time  Warner  and  Comcast  each  provide  to  the  Office  of  the  Secretary  of  the  Commission  an  affidavit, 
 signed  by  a  competent  officer  of  the  companies,  certifying  that  the  requirements  of  section  76.  501  of  the  Commissions  rules,  47  C.  F.  R.    76.  501,  have  been  satisfied. 


 315.  IT  IS  FURTHER  ORDERED  that  within  90  days  after  consummation  of  the  transactions,  Time  Warner  and  Comcast  each  provide  to  the  Office  of  the  Secretary  of  the  Commission  an  affidavit, 
 signed  by  a  competent  officer  of  the  companies,  certifying  without  qualification  that  the  requirements  of  section  76.504  of  the  Commissions  rules,  47  C.  F.  R.    76.504,  have  been  satisfied. 


 316.  IT  IS  FURTHER  ORDERED  that  Comcasts  request  for  approval  to  acquire,  upon  consummation  of  the  transactions,  ownership  interests  in  entities  holding  cable  systems  and  related  assets, 
 in  exchange  for  its  interests  in  Time  Warner  and  TWE,  hitherto  held  in  trust,  is  granted.  This  grant  of 


 912  Public  Interest  Statement  at  5  n.  9. 
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 approval  encompasses  regulatory  approvals  required  by  Section  5(  e)  of  the  Trust  Agreement  913  for  distribution  of  trust  assets  to  be  redeemed  pursuant  to  the  Time  Warner  Redemption  Transaction  and  the 
 TWE  Redemption  Transaction  under  the  terms  of  the  trust  agreement  pursuant  to  Comcast-  AT&  T  Order.  914 


 317.  IT  IS  FURTHER  ORDERED  that  the  license  transfers  approved  herein  must  be  consummated  and  notification  provided  to  the  Commission  within  60  days  of  public  notice  of  approval 
 pursuant  to  Commission  rule  78.35(  e).  915  The  above  grants  are  limited  to  Commission  licenses  and  authorizations,  and  shall  not  be  deemed  to  constitute  independently  sufficient  authorizations  to  operate  the 
 related  cable  systems.  916  If  Applicants  are  unable  to  consummate  any  of  the  license  transfers  contained  in  the  Applications  because  LFA  approvals  are  still  pending,  or  for  any  other  reason,  Applicants  must 
 submit  written  notice  to  the  Commission  prior  to  the  expiration  of  the  60-  day  deadline.  If  Applicants  are  unable  to  consummate  consistent  with  the  provisions  of  Commission  rule  78.35(  e),  Applicants  must  seek 
 an  extension  of  time  within  which  to  consummate  or  withdraw  the  affected  license  transfer  or  assignment  applications.  Written  notice  must  include  (1)  the  reason  for  the  inability  to  consummate  any  of  the 
 transfers  or  assignments;  (2)  identification  of  the  affected  cable  systems,  including  community  and  number  of  subscribers  attributable  to  each  cable  system;  and  (3)  identification  of  the  relevant  CARS, 
 wireless  or  other  authorization.  In  this  regard,  if  Applicants  failure  to  consummate  would  result  in  violation  of  any  Commission  rule,  Applicants  must  file  within  30  days  of  the  action  that  results  in 
 violation  of  the  rule(  s)  the  necessary  applications  to  remedy  the  violation.  Applicants  must  provide  notice  within  seven  days  of  the  final  outcome  of  any  proceeding  which  affects  their  ability  to  operate  a  system 
 that  would  have  undergone  a  change  in  ownership  as  a  result  of  the  transfers  described  in  the  transactions. 
 318.  IT  IS  FURTHER  ORDERED  that  pursuant  to  sections  4(  i),  4(  j),  214(  a),  214(  c),  309,  and  310(  d),  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    154(  i),  154(  j),  214(  a),  214(  c), 


 309,  310(  d),  that  the  Petitions  to  Deny  filed  by  Free  Press  et.  al.,  Communications  Workers  of  America  and  International  Brotherhood  of  Electrical  Workers,  The  America  Channel  LLC  and  National  Hispanic 
 Media  Coalition  ARE  DENIED  except  to  the  extent  otherwise  indicated  in  this  Order. 
 319.  IT  IS  FURTHER  ORDERED  that  pursuant  to  sections  4(  i),  4(  j),  214(  a),  214(  c),  309,  and  310(  d),  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    154(  i),  154(  j),  214(  a),  214(  c), 


 309,  310(  d),  that  the  Motion  to  Hold  in  Abeyance  filed  October  31,  2005,  by  Free  Press,  Center  for  Creative  Voices  in  Media,  Office  of  Communication  of  the  United  Church  of  Christ,  Inc.,  U.  S.  Public 
 Interest  Research  Group,  Center  for  Digital  Democracy,  CCTV,  Center  for  Media  &  Democracy,  Media  Alliance,  National  Hispanic  Media  Coalition,  the  Benton  Foundation,  and  Reclaim  the  Media  IS 
 DENIED. 
 320.  IT  IS  FURTHER  ORDERED  that  pursuant  to  sections  4(  i),  4(  j),  214(  a),  214(  c),  309,  and  310(  d),  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    154(  i),  154(  j),  214(  a),  214(  c), 


 309,  310(  d),  that  the  Petition  to  Condition  Approval  of  Application  to  Transfer  Control  of  CARS  Stations  filed  by  the  City  of  Buenaventura,  California  and  the  Petition  of  TCR  Sports  Broadcasting  Holding, 
 L.  L.  P.  to  Impose  Conditions  or,  in  the  alternative,  To  Deny  Part  of  the  Proposed  Transaction  ARE  DENIED  except  to  the  extent  otherwise  indicated  in  this  Order. 


 321.  IT  IS  FURTHER  ORDERED  THAT  pursuant  to  sections  4(  i),  4(  j),  214  (a),  214(  c),  309,  and  310(  d),  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    154(  i),  154(  j),  214(  a),  214(  c), 


 913  Agreement  and  Declaration  of  Trust,  by  and  among  MOC  Holdco  II,  Inc.,  Edith  E.  Holiday,  Trustee,  and  The 
 Capital  Trust  Company  of  Delaware,  Section  5(  e)  (dated  Mar.  31,  2003).  914 
 Comcast-  AT&  T  Order,  17  FCC  Rcd  at  23246    74-  77.  915 
 47  C.  F.  R.    78.35(  e).  916 
 The  Commissions  ruling  does  not  address  any  state  or  local  franchising  requirements  or  authorizations  necessary  to  be  fulfilled  or  obtained  prior  to  consummation. 
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 309,  310(  d),  and  47  C.  F.  R.    1.46  of  the  Commissions  rules,  the  Motion  for  Extension  of  Time  of  Black  Television  News  Channel,  LLC  to  File  Comments  is  DENIED. 
 322.  IT  IS  FURTHER  ORDERED  that  this  Memorandum  Opinion  and  Order  SHALL  BE  EFFECTIVE  upon  release,  in  accordance  with  section  1.103  of  the  Commissions  rules,  47  C.  F.  R.   
 1.103. 
 FEDERAL  COMMUNICATIONS  COMMISSION 


 Marlene  H.  Dortch  Secretary 
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 APPENDIX  A 
 Petitioners  and  Commenters 
 Petitions  to  Deny  and/  or  to  Condition  Approval 
 City  of  San  Buenaventura,  California  (  City  of  San  Buenaventura)  Communications  Workers  of  America  and  International  Brotherhood  of  Electrical  Workers 
 (  CWA/  IBEW)  Free  Press,  Center  for  Creative  Voices  in  Media,  Office  of  Communication  of  the  United  Church  of 
 Christ,  Inc.,  U.  S.  Public  Interest  Research  Group,  Center  for  Digital  Democracy,  CCTV,  Center  for  Media  &  Democracy,  Media  Alliance,  National  Hispanic  Media  Coalition,  The  Benton 
 Foundation,  and  Reclaim  the  Media  (  Free  Press)  National  Hispanic  Media  Coalition  (  NHMC) 
 TCR  Sports  Broadcasting  Holding,  L.  L.  P.  (  TCR)  The  America  Channel,  LLC  (  TAC) 


 Initial  Comments 
 Adam  Thierer  and  Daniel  English  (  Thierer  and  English)  Americans  for  Prosperity* 
 Americans  for  Tax  Reform*  Black  Leadership  Forum,  Inc.* 
 DIRECTV,  Inc.  (  DIRECTV)  EchoStar  Satellite  L.  L.  C.  (  EchoStar) 
 Faith  and  Family  Broadcasting  Coalition  (  FFBC)  Florida  Communities  of  Clay  County,  Lee  County,  Orange  County,  Polk  County,  and  St.  Lucie  County 
 (  Florida  Communities)  FreedomWorks* 
 IBC  Worldwide,  LTD.  (  IBC)  KVMD  Licensee  Co.,  LLC  (  KVMD) 
 Marco  Island  Cable  (  MIC)  National  Black  Chamber  of  Commerce,  Inc.* 
 National  Braille  Press*  National  Congress  of  Black  Women,  Inc.* 
 National  Conference  of  Black  Mayors,  Inc.*  NDN* 
 RCN  Telecom  Services,  Inc.  (  RCN)  Urban  League  of  Greater  Hartford,  Inc.* 


 Reply  Comments 
 Alliance  for  Community  Peace*  ArtServe* 
 Association  of  Hispanic  Advertising  Agencies*  Black  Entertainment  &  Telecommunications  Association* 
 Black  Television  News  Channel  (  BTNC)  1  Communications  Workers  of  America  and  International  Brotherhood  of  Electrical  Workers 
 (  CWA/  IBEW)  Congreso  de  Latinos  Unidos* 


 1  BTNC  submitted  its  filing  after  the  deadline  for  filing  reply  comments.  See  Order  at  note  64. 
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 2 
 Consumer  Federation  of  America  and  Consumers  Union  (  CFA/  CU)  Cuban  American  Publishers  Association* 
 El  Heraldo  de  Broward  and  Viva  Broward!*  IBC  Worldwide,  LTD.  (  IBC) 
 Florida  Hispanic  Legislative  Caucus*  Heart  of  Los  Angeles  Youth* 
 Hispanas  Organized  for  Political  Equality*  Hispanic  Unity  of  Florida* 
 Latin  Chamber  of  Commerce  of  Broward  County*  Ministerial  Alliance  Against  the  Digital  Divide* 
 National  Association  of  Broadcasters  (  NAB)  National  Association  of  Telecommunications  Officers  and  Advisors,  Reclaim  the  Media,  CCTV,  Center 
 for  Media  &  Democracy,  Citizens  for  Independent  Public  Broadcasting,  and  Alliance  for  Community  Media  (  NATOA) 
 National  Hispanic  Corporate  Council*  National  Hispanic  Foundation  for  the  Arts* 
 Oiste?*  Puerto  Rican/  Hispanic  Chamber  of  Commerce  of  Broward  County* 
 TCR  Sports  Broadcasting  Holding,  L.  L.  P.  (  TCR)  TELEMIAMI,  Inc.* 
 The  Heartland  Institute  TV  One* 
 Westwood  Community  Development  Corporation*  WDLP  Broadcasting  Co.  LLC* 


 *  Filed  a  letter  in  support  of  the  transactions. 
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 APPENDIX  B 
 Remedies  and  Conditions 
 A.  Definitions 
 For  purposes  of  the  conditions  set  forth  below,  the  following  definitions  apply: 
 Comcast  means  Comcast  Corporation  and  its  subsidiaries,  affiliates,  parents,  successors,  and  assigns. 
 Time  Warner  means  Time  Warner  Cable  Inc.  and  its  subsidiaries,  affiliates,  parents,  successors,  and  assigns. 


 Regional  Sports  Network  and  RSN  mean  any  non-  broadcast  video  programming  service  that  (1)  provides  live  or  same-  day  distribution  within  a  limited  geographic  region  of  sporting  events  of  a  sports 
 team  that  is  a  member  of  Major  League  Baseball,  the  National  Basketball  Association,  the  National  Football  League,  the  National  Hockey  League,  NASCAR,  NCAA  Division  I  Football,  NCAA  Division  I 
 Basketball  and  (2)  in  any  year,  carries  a  minimum  of  either  100  hours  of  programming  that  meets  the  criteria  of  subheading  1,  or  10%  of  the  regular  season  games  of  at  least  one  sports  team  that  meets  the 
 criteria  of  subheading  1. 
 B.  Conditions 
 1.  Program  Access  Conditions 
 a.  Comcast,  Time  Warner,  and  their  existing  or  future  Covered  RSNs,  regardless  of  the  means  of  delivery,  shall  not  offer  any  such  RSN  on  an  exclusive  basis  to  any  MVPD,  and  Comcast,  Time  Warner, 


 and  their  Covered  RSNs,  regardless  of  the  means  of  delivery,  are  required  to  make  such  RSNs  available  to  all  MVPDs  on  a  non-  exclusive  basis  and  on  nondiscriminatory  terms  and  conditions.  1 


 b.  Comcast  and  Time  Warner  will  not  enter  into  an  exclusive  distribution  arrangement  with  any  such  Covered  RSN,  regardless  of  the  means  of  delivery.  2 
 c.  Neither  Comcast  nor  Time  Warner  (including  any  entity  with  which  it  is  affiliated)  shall  unduly  or  improperly  influence  (i)  the  decision  of  any  Covered  RSN,  regardless  of  the  means  of  delivery,  to  sell 
 programming  to  an  unaffiliated  MVPD;  or  (ii)  the  prices,  terms,  and  conditions  of  sale  of  programming  by  a  Covered  RSN,  regardless  of  the  means  of  delivery,  to  an  unaffiliated  MVPD.  3 


 d.  These  exclusive  contracts  and  practices,  non-  discrimination,  and  undue  or  improper  influence  requirements  of  the  program  access  rules  will  apply  to  Comcast,  Time  Warner,  and  their  Covered  RSNs 
 for  six  years,  provided  that  if  the  program  access  rules  are  modified  this  condition  shall  be  modified  to  conform  to  any  revised  rules  adopted  by  the  Commission.  4 


 1  47  C.  F.  R.    76.1002.  The  conditions  in  this  section  B(  1)  are  intended  to  prohibit  all  exclusive  arrangements, 
 including  those  that  may  not  be  effectuated  by  a  formal  agreement.  A  Covered  RSN  is  an  RSN  (i)  that  Comcast  or  Time  Warner  currently  manages  or  controls,  or  (ii)  in  which  Comcast  or  Time  Warner,  on  or  after  the  date  of 


 adoption  of  this  Order  and  during  the  period  of  this  condition,  acquires  either  an  attributable  interest,  an  option  to  purchase  an  attributable  interest,  or  one  that  would  permit  management  or  control  of  the  RSN.  The  Applicants  are 
 prohibited  from  acquiring  an  attributable  interest  in  an  RSN  during  the  period  of  the  conditions  set  forth  in  this  Appendix  if  the  RSN  is  not  obligated  to  abide  by  such  conditions. 


 2  47  C.  F.  R.    76.1002. 
 3  47  C.  F.  R.    76.1002. 
 4  The  condition  is  not  intended  to  affect  the  application  of  the  program  access  rules  to  Comcasts  and  Time  Warners 
 satellite-  delivered  networks,  which  will  continue  to  be  subject  to  the  program  access  rules  even  after  these  (continued.) 
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 e.  For  enforcement  purposes,  aggrieved  MVPDs  may  bring  program  access  complaints  against  Comcast,  Time  Warner,  or  their  Covered  RSNs  using  the  procedures  found  at  Section  76.1003, 
 47  C.  F.  R.    76.  1003,  of  the  Commissions  rules. 
 2.  Commercial  Arbitration  Remedy 


 a.  An  aggrieved  MVPD  may  submit  a  dispute  over  the  terms  and  conditions  of  carriage  of  an  RSN  subject  to  these  conditions  (i)  that  Comcast  or  Time  Warner  currently  manages  or  controls  or  (ii)  in  which 
 Comcast  or  Time  Warner,  on  or  after  the  date  of  adoption  of  this  Order  and  during  the  period  of  this  condition,  acquires  either  an  attributable  interest,  an  option  to  purchase  an  attributable  interest,  or  one  that 
 would  permit  management  or  control  of  the  RSN  (a  Covered  RSN).  5  b.  Following  the  expiration  of  any  existing  contract,  or  90  days  after  a  first  time  request  for  carriage,  an 
 MVPD  may  notify  the  Covered  RSN  and  either  Time  Warner  or  Comcast,  as  appropriate,  within  five  business  days  that  it  intends  to  request  commercial  arbitration  to  determine  the  terms  of  the  new 
 affiliation  agreement.  c.  Upon  receiving  timely  notice  of  the  MVPDs  intent  to  arbitrate,  either  Time  Warner  or  Comcast,  as 
 applicable,  shall  ensure  that  the  Covered  RSN  allows  continued  carriage  under  the  same  terms  and  conditions  of  the  expired  affiliation  agreement  as  long  as  the  MVPD  continues  to  meet  the  obligations  set 
 forth  in  this  condition.  d.  Carriage  of  the  disputed  programming  during  the  period  of  arbitration  is  not  required  in  the  case  of 
 first  time  requests  for  carriage.  6  e.  The  period  following  the  Covered  RSNs  receipt  of  timely  notice  of  the  MVPDs  intent  to  arbitrate 
 and  before  the  MVPDs  filing  for  formal  arbitration  with  the  American  Arbitration  Association  (  AAA),  shall  constitute  a  cooling  off  period  during  which  time  negotiations  are  to  continue. 
 f.  The  MVPDs  formal  demand  for  arbitration,  which  shall  include  the  MVPDs  final  offer,  may  be  filed  with  the  AAA  no  earlier  than  the  fifteenth  business  day  after  the  expiration  of  the  RSN  contract  and 
 no  later  than  the  end  of  the  twentieth  business  day  following  such  expiration.  If  the  MVPD  makes  a  timely  demand,  either  Time  Warner  or  Comcast,  as  applicable,  shall  ensure  that  the  Covered  RSN 
 participates  in  the  arbitration  proceeding.  g.  The  AAA  will  notify  the  Covered  RSN,  Time  Warner  or  Comcast,  as  appropriate,  and  the  MVPD 
 upon  receiving  the  MVPDs  formal  filing.  h.  Either  Time  Warner  or  Comcast,  as  appropriate,  shall  ensure  that  the  Covered  RSN  files  a  final 
 offer  with  the  AAA  within  two  business  days  of  being  notified  by  the  AAA  that  a  formal  demand  for  arbitration  has  been  filed  by  the  MVPD. 
 i.  The  MVPDs  final  offer  may  not  be  disclosed  until  the  AAA  has  received  the  final  offer  from  the  Covered  RSN. 
 j.  A  final  offer  shall  be  in  the  form  of  a  contract  for  the  carriage  of  the  programming  for  a  period  of  at  least  three  years.  A  final  offer  may  not  include  any  provision  to  carry  any  video  programming  networks  or 
 any  other  service  other  than  the  Covered  RSN. 
 3.  Rules  of  Arbitration 
 (Continued  from  previous  page)  conditions  expire.  Although  most  of  the  program  access  rules  have  no  sunset  date,  Section  76.1002(  c),  the 
 prohibition  on  exclusive  contracts,  sunsets  on  October  5,  2007,  unless  the  Commission  finds  that  the  prohibition  continues  to  be  necessary  to  protect  competition  in  the  distribution  of  video  programming.  See  47  C.  F.  R.   
 76.  1002(  c)(  2).  In  the  year  prior  to  the  sunset,  the  Commission  will  conduct  a  proceeding  to  evaluate  the  circumstances  in  the  video  programming  marketplace. 


 5  See  infra  para.  4.  The  Applicants  are  prohibited  from  acquiring  an  attributable  interest  in  an  RSN  during  the 
 period  of  the  conditions  set  forth  in  this  Appendix  if  the  RSN  is  not  obligated  to  abide  by  such  conditions.  6 
 A  first  time  request  for  carriage  does  not  include  a  request  for  a  previously  carried  RSN  that  has  experienced  a  change  in  ownership. 
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 a.  The  arbitration  will  be  decided  by  a  single  arbitrator  under  the  expedited  procedures  of  the  commercial  arbitration  rules,  then  in  effect,  of  the  AAA  (the  Rules),  excluding  the  rules  relating  to 
 large,  complex  cases,  but  including  the  modifications  to  the  Rules  set  forth  in  Appendix  C.  The  arbitrator  shall  issue  his  decision  within  30  days  from  the  date  that  the  arbitrator  is  appointed. 
 b.  The  parties  may  agree  to  modify  any  of  the  time  limits  set  forth  above  and  any  of  the  procedural  rules  of  the  arbitration;  absent  agreement,  however,  the  rules  specified  herein  apply.  The  parties  may  not, 
 however,  modify  the  requirement  that  they  engage  in  final-  offer  arbitration.  c.  The  arbitrator  is  directed  to  choose  the  final  offer  of  the  party  that  most  closely  approximates  the  fair 
 market  value  of  the  programming  carriage  rights  at  issue.  d.  Under  no  circumstances  will  the  arbitrator  choose  a  final  offer  that  does  not  permit  the  Covered 
 RSN  to  recover  a  reasonable  share  of  the  costs  of  acquiring  the  programming  at  issue.  e.  To  determine  fair  market  value,  the  arbitrator  may  consider  any  relevant  evidence  (and  may  require 
 the  parties  to  submit  such  evidence  to  the  extent  it  is  in  their  possession),  including,  but  not  limited  to:  i.  current  or  previous  contracts  between  MVPDs  and  RSNs  in  which  Comcast  or  Time  Warner 
 do  not  have  an  interest  as  well  as  offers  made  in  such  negotiations  (which  may  provide  evidence  of  either  a  floor  or  a  ceiling  of  fair  market  value); 
 ii.  evidence  of  the  relative  value  of  such  programming  compared  to  the  Covered  RSN  programming  at  issue  (e.  g.,  advertising  rates,  ratings); 
 iii.  contracts  between  MVPDs  and  RSNs  on  whose  behalf  Comcast  or  Time  Warner  have  negotiated,  made  before  Comcast  or  Time  Warner  acquired  control  of  the  systems  swapped  and  acquired 
 in  the  Adelphia  transactions;  7  iv.  offers  made  in  such  negotiations; 
 v.  internal  studies  or  discussions  of  the  imputed  value  of  Covered  RSN  programming  in  bundled  agreements; 
 vi.  other  evidence  (including  internal  discussions)  of  the  value  of  Covered  RSN  programming;  vii.  changes  in  the  value  of  programming  agreements  for  RSNs  in  which  Time  Warner  or 
 Comcast  do  not  have  an  attributable  interest;  viii.  changes  in  the  value  or  costs  of  the  Covered  RSNs  programming,  or  in  other  prices  relevant 
 to  the  relative  value  of  the  Covered  RSN  programming  (e.  g.,  advertising  rates).  f.  The  arbitrator  may  not  consider  offers  prior  to  the  arbitration  made  by  the  MVPD  and  the  Covered 
 RSN  for  the  programming  at  issue  in  determining  the  fair  market  value.  g.  If  the  arbitrator  finds  that  one  partys  conduct,  during  the  course  of  the  arbitration,  has  been 
 unreasonable,  the  arbitrator  may  assess  all  or  a  portion  of  the  other  partys  costs  and  expenses  (including  attorney  fees)  against  the  offending  party. 
 h.  Following  resolution  of  the  dispute  by  the  arbitrator,  to  the  extent  practicable,  the  terms  of  the  new  affiliation  agreement  will  become  retroactive  to  the  expiration  date  of  the  previous  affiliation  agreement. 
 If  carriage  of  the  RSN  programming  has  continued  uninterrupted  during  the  arbitration  process,  and  if  the  arbitrators  award  requires  a  higher  amount  to  be  paid  than  was  required  under  the  terms  of  the  expired 
 contract,  the  MVPD  will  make  an  additional  payment  to  the  Covered  RSN  in  an  amount  representing  the  difference  between  the  amount  that  is  required  to  be  paid  under  the  arbitrator's  award  and  the  amount 
 actually  paid  under  the  terms  of  the  expired  contract  during  the  period  of  arbitration.  If  carriage  of  the  RSN  programming  has  continued  uninterrupted  during  the  arbitration  process,  and  if  the  arbitrators 
 award  requires  a  smaller  amount  to  be  paid  than  was  required  under  the  terms  of  the  expired  contract,  the  Covered  RSN  will  credit  the  MVPD  with  an  amount  representing  the  difference  between  the  amount 


 7  The  Adelphia  transactions  are  (1)  the  sale  of  certain  cable  systems  and  assets  of  Adelphia  to  subsidiaries  or 
 affiliates  of  Time  Warner;  (2)  the  sale  of  certain  cable  systems  and  assets  of  Adelphia  to  subsidiaries  or  affiliates  of  Comcast;  (3)  the  exchange  of  certain  cable  systems  and  assets  between  affiliates  or  subsidiaries  of  Time  Warner  and 


 Comcast;  and  (4)  the  redemption  of  Comcasts  interests  in  Time  Warner  and  TWE.  See  Order  at  para.  1. 
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 actually  paid  under  the  terms  of  the  expired  contract  during  the  period  of  arbitration  and  the  amount  that  is  required  to  be  paid  under  the  arbitrators  award. 
 i.  Judgment  upon  an  award  entered  by  the  arbitrator  may  be  entered  by  any  court  having  competent  jurisdiction  over  the  matter,  unless  one  party  indicates  that  it  wishes  to  seek  review  of  the  award  with  the 
 Commission  and  does  so  in  a  timely  manner. 
 4.  Review  of  Award  by  the  Commission 
 a.  A  party  aggrieved  by  the  arbitrators  award  may  file  with  the  Commission  a  petition  seeking  de  novo  review  of  the  award.  The  petition  must  be  filed  within  30  days  of  the  date  the  award  is  published. 
 The  petition,  together  with  an  unredacted  copy  of  the  arbitrators  award,  shall  be  filed  with  the  Secretarys  office  and  shall  be  concurrently  served  on  the  Chief,  Media  Bureau.  The  Commission  shall  issue  its 
 findings  and  conclusions  not  more  than  60  days  after  receipt  of  the  petition,  which  may  be  extended  by  the  Commission  for  one  period  of  60  days. 
 b.  The  MVPD  may  elect  to  carry  the  programming  at  issue  pending  the  FCC  decision,  subject  to  the  terms  and  conditions  of  the  arbitrator's  award. 
 c.  In  reviewing  the  award,  the  Commission  will  examine  the  same  evidence  that  was  presented  to  the  arbitrator  and  will  choose  the  final  offer  of  the  party  that  most  closely  approximates  the  fair  market  value 
 of  the  programming  carriage  rights  at  issue.  d.  The  Commission  may  award  the  winning  party  costs  and  expenses  (including  reasonable  attorney 
 fees)  to  be  paid  by  the  losing  party,  if  it  considers  the  appeal  or  conduct  by  the  losing  party  to  have  been  unreasonable.  Such  an  award  of  costs  and  expenses  may  cover  both  the  appeal  and  the  costs  and  expenses 
 (including  reasonable  attorney  fees)  of  the  arbitration.  e.  Judgment  upon  an  award  entered  by  the  arbitrator  may  be  entered  by  any  court  having  competent 
 jurisdiction  over  the  matter. 
 5.  Provisions  Applicable  to  Small  MVPDs:  An  MVPD  meeting  the  definition  of  a  small  cable  company  8  may  appoint  a  bargaining  agent  to  bargain  collectively  on  its  behalf  in  negotiating  carriage  of 
 an  Covered  RSN  and  either  Time  Warner  or  Comcast,  as  applicable,  shall  ensure  that  the  Covered  RSN  may  not  refuse  to  negotiate  carriage  with  such  an  entity.  The  designated  collective  bargaining  entity  will 
 have  all  the  rights  and  responsibilities  granted  by  these  conditions.  An  MVPD  that  uses  a  bargaining  agent  may,  notwithstanding  any  contractual  term  to  the  contrary,  disclose  to  such  bargaining  agent  the 
 date  upon  which  its  then  current  carriage  contract  with  the  Covered  RSN  expires. 
 6.  Additional  Provisions  Concerning  Arbitration:  Not  earlier  than  60  business  days  and  no  later  than  20  business  days  prior  to  the  expiration  of  an  affiliation  agreement  with  an  MVPD  for  video  programming 
 subject  to  this  condition,  the  Covered  RSN  must  provide  the  MVPD  with  a  copy  of  the  conditions  imposed  in  this  Order.  No  later  than  ten  business  days  after  receiving  a  first  time  request  for  carriage,  the 
 Covered  RSN  must  provide  the  requesting  MVPD  with  a  copy  of  the  conditions  imposed  in  this  Order. 
 7.  The  foregoing  arbitration  condition  shall  remain  in  effect  for  six  years  from  the  adoption  date  of  this  Order.  The  Commission  will  consider  a  petition  for  modification  of  this  condition  if  it  can  be 
 demonstrated  that  there  has  been  a  material  change  in  circumstance  or  the  condition  has  proven  unduly  burdensome,  rendering  the  condition  no  longer  necessary  in  the  public  interest. 


 8  This  definition  of  a  small  cable  company  was  developed,  with  the  Small  Business  Administrations  approval,  for 
 purposes  of  rate  regulation.  See  47  C.  F.  R.    76.  901(  e). 
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 APPENDIX  C 
 Modifications  to  Rules  for  Arbitration 
 1.  We  modify  the  Rules  in  several  respects  as  they  apply  to  arbitration  involving  regional  sports  networks. 


 2.  Initiation  of  Arbitration.  Arbitration  shall  be  initiated  as  provided  in  Rule  R-  4  except  that,  under  Rule  R-  4(  a)(  ii)  the  MVPD  shall  not  be  required  to  submit  copies  of  the  arbitration  provisions  of  the 
 contract,  but  shall  instead  refer  to  this  Order  in  the  demand  for  arbitration.  Such  reference  shall  be  sufficient  for  the  AAA  to  take  jurisdiction. 


 3.  Appointment  of  the  Arbitrator.  Appointment  of  an  arbitrator  shall  be  in  accordance  with  Rule  E-  4  of  the  Rules.  Arbitrators  included  on  the  list  referred  to  in  Rule  E-  4(  a)  of  the  Rules  shall  be  selected 
 from  a  panel  jointly  developed  by  the  American  Arbitration  Association  and  the  Commission  and  which  is  based  on  the  following  criteria: 


 The  arbitrator  shall  be  a  lawyer  admitted  to  the  bar  of  a  state  of  the  United  States  or  the  District  of  Columbia; 
 The  arbitrator  shall  have  been  practicing  law  for  at  least  10  years; 
 The  arbitrator  shall  have  prior  experience  in  mediating  or  arbitrating  disputes  concerning  media  programming  contracts; 


 The  arbitrator  shall  have  negotiated  or  have  knowledge  of  the  terms  of  comparable  cable  programming  network  contracts. 
 4.  Exchange  of  Information.  At  the  request  of  any  party,  or  at  the  discretion  of  the  arbitrator,  the  arbitrator  may  direct  the  production  of  current  and  previous  contracts  between  either  of  the  parties  and 
 MVPDs,  broadcast  stations,  video  programming  networks,  and  sports  teams,  leagues,  and  organizations  as  well  as  any  additional  information  that  is  considered  relevant  in  determining  the  value  of  the 
 programming  to  the  parties.  Parties  may  request  that  access  to  information  of  a  commercially  sensitive  nature  be  restricted  to  the  arbitrator  and  outside  counsel  and  experts  of  the  opposing  party  pursuant  to  the 
 terms  of  a  protective  order. 
 5.  Administrative  Fees  and  Expenses.  If  the  arbitrator  finds  that  one  partys  conduct,  during  the  course  of  the  arbitration,  has  been  unreasonable,  the  arbitrator  may  assess  all  or  a  portion  of  the  other 
 partys  costs  and  expenses  (including  reasonable  attorneys  fees)  against  the  offending  party. 
 6.  Locale.  In  the  absence  of  agreement  between  the  parties,  the  arbitration  shall  be  held  in  the  city  that  contains  the  headquarters  of  the  MVPD. 


 7.  Form  of  Award.  The  arbitrator  shall  render  a  written  award  containing  the  arbitrators  findings  of  fact  and  reasons  supporting  the  award.  If  the  award  contains  confidential  information,  the 
 arbitrator  shall  compile  two  versions  of  the  award;  one  containing  the  confidential  information  and  one  with  such  information  redacted.  The  version  of  the  award  containing  the  confidential 
 information  shall  only  be  disclosed  to  persons  bound  by  the  protective  order  issued  in  connection  with  the  arbitration.  The  parties  shall  include  such  confidential  version  in  the  record  of  any 
 review  of  the  arbitrators  decision  by  the  Commission. 
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 APPENDIX  D 
 1.  This  appendix  explains  the  economic  analysis  undertaken  by  the  Commission  to  evaluate  the  potential  harms  deriving  from  the  increased  vertical  integration  of  regional  sports  programming  networks 
 and  cable  systems  that  may  result  from  the  transaction  under  review.  It  presents  an  economic  model  of  a  uniform  price  increase  strategy.  The  model  sets  forth  the  most  important  determinants  of  the  strategys 
 profitability.  The  model  indicates  that  one  of  the  most  important  elements  is  consumer  response  to  an  MVPDs  failure  to  carry  an  RSN.  Accordingly,  the  appendix  describes  the  estimation  of  this  response. 
 We  also  assign  values  to  the  remaining  variables  in  the  model  and  calculate  the  signs  and  magnitudes  of  the  changes  in  the  individual  markets  due  to  the  transactions. 


 I.  A  MODEL  OF  UNIFORM  PRICE  INCREASES 
 2.  Standard  economic  models  of  raising  rivals  costs  assume  that  firms  are  able  to  engage  in  price  discrimination.  However,  the  Commission  rules  do  not  permit  vertically  integrated  video 


 programmers  to  engage  in  price  discrimination  except  within  certain  narrow  limits.  1  Accordingly,  the  standard  models  pertaining  to  raising  rivals  costs  do  not  fit  the  institutions  of  the  multichannel  video 
 programming  industry  perfectly  because  the  integrated  firm  would  need  to  raise  the  costs  of  both  rivals  and  non-  rival  firms  in  order  to  comply  with  the  Commissions  rules.  However,  a  model  is  available, 
 furnished  by  Lexecon,  on  behalf  of  DIRECTV.  Lexecons  simple  model  of  raising  rivals  costs  illustrates  the  process  by  which  a  vertically  integrated  RSN  has  an  incentive  to  increase  its  prices  when  there  is  an 
 increase  in  size  of  the  MVPD  with  which  it  is  integrated.  2  Using  its  framework,  Lexecon  estimates  the  maximum  amount  that  a  competing  MVPD  would  be  willing  to  pay  for  access  to  an  integrated  RSN.  This 
 amount  would  be  the  price  that  would  make  the  competing  MVPD  indifferent  as  to  whether  to  pay  the  price  and  carry  the  programming  or  decline  to  carry  the  programming  and  suffer  a  subscriber  loss  because 
 the  programming  is  not  available. 
 3.  The  extent  of  subscriber  losses  when  an  MVPD  does  not  carry  particular  programming  is  a  critical  factor  in  determining  the  price  an  MVPD  is  willing  to  pay  for  that  programming.  In  turn,  the  loss 


 of  subscribers  incurred  by  an  MVPD  that  does  not  carry  the  programming  is  influenced  by  whether  any  competing  MVPDs  carry  the  programming.  If  a  competing  MVPD  does  carry  the  programming,  the  loss 
 of  subscribers  is  likely  to  be  greater  than  if  a  competing  MVPD  does  not  carry  the  programming,  because  some  fraction  of  the  consumers  who  value  the  programming  will  switch  to  an  MVPD  that  does  carry  the 
 programming.  Of  course,  even  if  none  of  the  MVPDs  in  the  market  carry  the  programming,  there  still  may  be  a  loss  in  customers  when  particular  programming  is  no  longer  offered,  because  MVPD  service 
 would  be  less  valuable  to  some  customers  without  the  desired  programming. 
 4.  To  determine  the  maximum  amount  a  competing  MVPD  would  be  willing  to  pay  for  video  programming,  we  compare  the  profits  that  the  competing  MVPD  would  earn  if  it  carried  the  video 


 programming  with  the  profits  that  it  would  earn  if  it  did  not  carry  the  programming.  The  maximum  willingness  to  pay  for  the  programming  is  the  price  that  would  yield  the  same  level  of  profits  regardless  of 
 whether  the  programming  were  carried. 
 5.  The  competing  MVPDs  profits  from  carrying  or  not  carrying  the  video  programming  depend  on  whether  the  other  MVPDs  competing  for  subscribers  in  the  market  carry  the  programming.  To  assist 


 us  in  our  analysis,  we  adopt  a  simplifying  assumption  used  by  Lexecon.  We  assume  that  other  unintegrated  MVPDs  that  serve  the  market  would  have  the  same  willingness  to  pay  as  the  competing 
 MVPD  and,  therefore,  whenever  the  price  of  the  video  programming  is  low  enough  to  induce  the 
 1  For  example,  prices  can  be  differentiated  based  on  cost  differentials.  See  47  C.  F.  R.    76.  1002(  b).  In  addition,  the 
 rules  do  not  cover  programming  that  is  delivered  to  the  headend  entirely  by  terrestrial  means.  See  47  C.  F.  R.    76.  1000(  h)-(  i);  76.  1002(  b).  Therefore,  the  uniform  price  increase  analysis  does  not  apply  to  such  programming. 


 2  DIRECTV  Surreply,  Ex.  A  at  12-  16. 
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 Federal  Communications  Commission  FCC  06-  105 
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 CHARLOTTE  is  an  indicator  variable  taking  on  the  value  of  1  when  the  responding  cable  system  is  located  in  the  Charlotte  DMA; 
 KEYDMA  is  an  indicator  variable  taking  on  the  value  of  1  when  the  responding  cable  system  is  located  in  a  DMA  that  is  home  to  a  professional  sports  team  that  is  a  member  of  Major  League  Baseball,  the 
 National  Basketball  Association,  the  National  Football  League,  or  the  National  Hockey  League; 
 DBSOVERAIR  is  an  indicator  variable  taking  on  the  value  of  1  when  one  or  both  DBS  operators  offer  local  broadcast  signals  in  the  DMA  where  the  responding  cable  system  is  located; 


 CABLECOMP  is  an  indicator  variable  taking  on  the  value  of  1  when  the  cable  system  competes  against  a  second  cable  operator; 
 HDTV  is  an  indicator  variable  taking  on  the  value  of  1  when  the  responding  cable  system  offers  one  or  more  channels  in  high-  definition  format; 
 INTERNET  is  an  indicator  variable  taking  on  the  value  of  1  when  the  responding  cable  system  offers  high-  speed  Internet  access; 
 LN  INCOME  is  the  log  of  the  median  household  income  in  the  county  containing  the  responding  system; 
 LN  MULTIDWELL  is  the  log  of  the  percent  of  households  in  multiple  dwelling  units  (  MDUs)  in  the  county  containing  the  responding  system;  9  and 
 LN  LATITUDE  is  the  log  of  the  latitude  of  the  county  containing  the  responding  system. 
 16.  We  use  instrumental  variables  to  account  for  possible  endogeneity  of  the  cable  price  and  the  number  of  cable  channels.  We  use  the  natural  logs  of  system  capacity  (MHz)  and  the  number  of 
 subscribers  served  nationally  by  the  cable  system  owner,  as  well  as  the  number  of  networks  with  which  the  cable  system  owner  is  vertically  integrated,  as  excluded  instruments.  We  perform  estimation  using 
 the  generalized  method  of  moments. 
 B.  Results 
 17.  Table  A-  1 
 DBS  Penetration  and  RSN  Access 


 Dependent  Variable:  LN  DBS  PENETRATION  Independent  Variables 
 Coefficient  z-  statistic 
 LN  CABLE  PRICE  2.37*  2.32  LN  CABLE  CHANNELS  -1.10*  -2.56 


 PHILLY  -0.52*  -6.47  SANDIEGO  -0.41*  -4.90 
 CHARLOTTE  -0.23  -1.57  KEYDMA  0.13*  2.30 
 DBSOVERAIR  -0.08  -1.31  CABLECOMP  0.34  1.41 


 9  We  define  a  multiple  dwelling  unit  as  one  that  contains  two  or  more  housing  units  in  one  building. 
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 Federal  Communications  Commission  FCC  06-  105 
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 HDTV  -0.13  -1.64  INTERNET  -0.09  -0.76 
 LN  INCOME  -0.36*  -2.91  LN  MULTIDWELL  -0.39*  -10.40 
 LN  LATITUDE  -0.03  -0.17  CONSTANT  -0.92  -0.33 


 Observations  676  Centered  R-  Squared  0.22 
 F-  Statistic  (13,  662)  40.57  Hansen  J  Statistic  24.56 


 *  -  significant  at  95%  confidence  level 
 18.  The  results  from  the  estimation  indicate  that  DBS  penetration  is  lower  in  two  of  the  three  areas  where  DBS  operators  have  not  been  able  to  carry  regional  sports  programming  even  after 
 accounting  for  other  factors  that  affect  consumers  decisions  to  purchase  DBS  service.  In  the  case  of  the  independent  variables  that  are  expressed  as  logarithms,  the  estimated  coefficients  represent  elasticities   
 the  percent  change  in  the  DBS  penetration  rate  resulting  from  a  one  percent  change  in  the  value  of  the  independent  variable.  This  is  not  true  for  indicator  variables.  They  measure  the  change  in  the  natural 
 logarithm  of  the  DBS  penetration  rate  when  the  indicator  variable  takes  on  a  value  of  1.  Therefore,  to  evaluate  the  economic  significance  of  access  to  regional  sports  programming  by  DBS  operators,  we 
 would  like  to  know  the  impact  of  unavailability  of  RSNs  on  the  percent  of  households  purchasing  DBS  service.  We  calculate  this  value  by  using  the  regression  equation  coefficients  and  the  underlying  data  to 
 predict  the  log  of  the  DBS  penetration  rate  in  Philadelphia  and  San  Diego.  10  We  calculate  the  weighted  average  of  this  value  using  the  number  of  basic  subscribers  to  the  responding  cable  system  as  weights. 
 The  predicted  DBS  penetration  rate  in  the  DMA  is  the  exponential  of  this  value.  We  calculate  this  value  a  second  time  assuming  that  the  regional  sports  programming  is  available  (variable  PHILLY  =  0  and 
 variable  SANDIEGO  =  0).  We  find  that,  in  Philadelphia,  the  regression  predicts  a  DBS  penetration  rate  of  8.6%  when  the  regional  sports  programming  is  not  available  and  a  rate  of  14.5%  if  the  programming 
 were  made  available.  In  San  Diego,  the  predicted  rate  when  the  programming  is  not  available  is  7.4%,  and  if  the  programming  is  available,  the  penetration  rate  would  be  11.  1%.  Therefore,  we  predict  that 
 DBS  penetration  is  40.  5%  lower  in  Philadelphia  and  33.  3%  lower  in  San  Diego  than  it  would  be  if  regional  sports  programming  were  available. 


 19.  These  results  are  best  viewed  as  estimates  of  the  impact  of  not  having  access  to  regional  sports  programming  on  an  entrant  in  the  MVPD  market.  The  regional  sports  programming  in 
 Philadelphia  and  San  Diego  has  not  been  available  to  DBS  operators  since  1997.  11  We  therefore  view  the  regression  results  as  an  imprecise  estimate  of  the  impact  on  DBS  operators  if  regional  sports 
 programming  were  withdrawn  from  the  operators  after  having  been  available  for  an  extended  period  of  time.  An  alternative  approach  to  estimating  the  effects  of  RSN  withdrawal  involves  examining 
 viewership  statistics.  An  average  of  [REDACTED]  to  [REDACTED]  of  households  with  access  to  CSN  Philadelphia  or  CSN  Mid-  Atlantic  view  the  network  in  a  four-  week  period  and  an  average  of 
 [REDACTED]  to  [REDACTED]  in  a  one-  week  period.  12  A  reasonable  estimate  of  the  households  that 
 10  We  do  not  calculate  a  value  for  Charlotte  because  the  coefficient  is  not  statistically  different  from  zero  at  the  95% 
 level  of  confidence.  11 
 Edward  Moran,  Comcast  Target  of  DirecTV  Complaint  Accused  of  Monopolizing  Sports  Coverage,  PHILADELPHIA  DAILY  NEWS,  Sept.  25,  1997,  at  84;  Jay  Posner,  Padres  to  Become  HD-  TV  Showpiece,  SAN  DIEGO 


 UNION-  TRIBUNE,  Feb.  20,  2004,  at  D-  9.  12 
 Comcast  Dec.  22,  2005  Response  to  Information  Request  III.  B.  5. 
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 would  switch  MVPDs  to  retain  access  to  regional  sports  programming  may  be  that  it  is  comprised  of  those  that  watch  an  RSN  on  a  weekly  basis. 
 20.  An  estimate  of  the  minimum  number  of  consumers  likely  to  switch  MVPDs  can  also  be  developed  from  instances  in  which  regional  sports  programming  has  been  withheld  for  short  periods  of 
 time.  In  the  News  Corp.-  Hughes  Order,  the  Commissions  staff  estimated  the  effect  of  withdrawing  the  Yankees  Entertainment  and  Sports  Network  (YES),  a  regional  sports  network  carrying  New  York 
 Yankees  baseball  games  and  New  Jersey  Nets  basketball  games,  from  Cablevision  in  2002  and  2003.  13  Cablevision  is  a  cable  operator  whose  cable  systems  are  entirely  within  the  New  York  DMA.  DIRECTV 
 was  able  to  carry  this  regional  sports  programming  during  the  period  when  Cablevision  was  unable  to  carry  the  programming.  The  number  of  additional  subscribers  that  DIRECTV  acquired  during  each 
 month  of  the  withdrawal  was  estimated  using  confidential  information  submitted  under  the  protective  orders  in  the  proceeding.  The  resulting  analysis  is  not  available  in  the  current  record.  Instead  we  rely  on 
 the  News  Corp.-  Hughes  analysis  of  Cablevisions  SEC  filings  to  examine  the  impact  of  temporary  withholding  of  regional  sports  programming.  14  The  analysis  indicates  that,  out  of  the  3  million 
 subscribers  and  4.3  million  homes  passed  by  Cablevision,  it  lost  approximately  64,000  subscribers  during  the  year  it  did  not  carry  YES.  This  equates  to  a  loss  of  2.1%  of  its  subscribers  and  1.5%  of  its  share  of 
 households. 
 III.  APPLYING  THE  UNIFORM  PRICE  INCREASE  MODEL  TO  REGIONAL  SPORTS  NETWORKS 


 21.  We  use  equation  (4),  above,  to  predict  the  transactions  impact  on  RSN  affiliation  fees.  The  equation  requires  a  number  of  values.  Since  EchoStar  and  DIRECTV  are  the  Applicants  largest 
 competitors,  we  focus  our  analysis  on  the  uniform  price  increase  that  would  result  if  one  of  them  were  the  target  of  the  strategy.  However,  as  the  name  indicates,  a  uniform  price  increase  would  be  borne  by  all 
 MVPDs. 
 22.  Homes  Passed  by  the  Applicants.  The  Applicants  have  submitted  estimates  of  the  number  of  basic  subscribers  to  cable  systems  they  manage  in  each  DMA  for  the  period  prior  to  and  following  the 


 transactions.  15  We  adjust  these  totals  by  also  including  basic  subscribers  served  by  systems  that  are  attributed  to,  but  not  managed  by,  the  Applicants.  Since  the  Applicants  are  unable  to  provide  subscriber 
 counts  by  DMA  for  some  attributable  non-  managed  systems,  we  must  estimate  the  likely  number  of  subscribers  to  these  systems.  16  Eighty-  three  DMAs  are  affected  by  this  estimation  procedure.  We 
 allocate  the  total  number  of  current  basic  subscribers  reported  by  the  Applicants  for  each  attributed  non-managed  entity  to  each  of  the  communities  served  by  the  entity  based  on  historical  estimates  of  the  basic 
 cable  subscribers  in  each  of  the  communities.  These  community-  level  estimates  are  then  aggregated  at  the  DMA  level  to  obtain  an  estimate  of  the  number  of  attributable  subscribers  in  each  DMA.  We  then 
 calculate  an  estimate  of  the  fraction  of  homes  each  Applicant  passes  by  dividing  the  number  of  attributable  subscribers  in  each  DMA  by  the  total  number  of  cable  subscribers  in  the  DMA  as  estimated 
 by  Nielsen  Media  Research. 
 23.  Relative  Market  Shares  of  Competing  MVPDs.  The  uniform  price  increase  model  requires  information  on  the  change  in  the  relative  market  shares  of  competing  MVPDs  when  they  do  or  do  not 


 13  News  Corp.-  Hughes  Order,  19  FCC  Rcd  at  646-  48,  App.  D,    39-  47. 
 14  Id.  at  648,  App.  D,    46. 
 15  Applicants  June  21,  2005  Ex  Parte;  Time  Warner  Feb.  23,  2006  Ex  Parte. 
 16  See  Comcast  Dec.  22,  2005  Response  to  Information  Request  II.  G;  Time  Warner  Dec.  22,  2005  Response  to 
 Information  Request  II.  G. 
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 Federal  Communications  Commission  FCC  06-  105 
 10 
 -  -  Jacksonville, 
 FL  66.4%  84.3%  27.0%  $  7.4  million  21.9%  $  6.4  million  Kansas  City, 
 KS  [REDACTED]  [REDACTED]  0.0%  -  0.0%  -  Los  Angeles, 
 CA  [REDACTED]  [REDACTED]  [REDACTED]  [REDACTED] 
 Memphis,  TN  56.4%  55.5%  -1.5%  $  -0.6  million  -1.2%  $  -0.5  million 


 Miami,  FL  61.5%  69.4%  13.0%  $  9.7  million  10.4%  $  8.4  million 
 Milwaukee,  WI  75.2%  75.2%  0.0%  -  0.0%  - 
 Minneapolis,  MN  [REDACTED]  [REDACTED]  [REDACTED]  [REDACTED] 


 Nashville,  TN  60.2%  60.2%  0.0%  -  0.0%  - 
 New  Orleans,  LA  6.8%  6.8%  0.0%  -  0.0%  - 


 New  York,  NY  23.0%  23.0%  0.0%  -  0.0%  - 
 Orlando,  FL  [REDACTED]  [REDACTED]  0.0%  -  0.0%  - 
 Philadelphia,  PA  79.2%  80.9%  2.2%  $  2.7  million  1.8%  $  2.3  million 


 Phoenix,  AZ  0.0%  0.0%  0.0%  -  0.0%  - 
 Pittsburgh,  PA  41.6%  66.6%  60.2%  $  23.7  million  43.9%  $  20.5  million 
 Portland,  OR  [REDACTED]  [REDACTED]  [REDACTED]  [REDACTED]  Sacramento, 


 CA  74.0%  74.0%  0.0%  -  0.0%  -  Salt  Lake  City, 
 UT  [REDACTED]  [REDACTED]  0.0%  -  0.0%  -  San  Antonio, 
 TX  80.0%  80.0%  0.0%  -  0.0%  - 
 San  Diego,  CA  26.9%  35.7%  32.5%  $  11.4  million  20.7%  $  9.9  million 
 San  Francisco,  CA  91.0%  91.7%  0.8%  $  0.7  million  0.7%  $  0.6  million 


 Seattle,  WA  [REDACTED]  [REDACTED]  0.0%  -  0.0%  - 
 St.  Louis,  MO  [REDACTED]  [REDACTED]  0.0%  -  0.0%  - 
 Tampa,  FL  [REDACTED]  [REDACTED]  0.0%  -  0.0%  - 
 Washington,  DC  45.9%  61.0%  33.0%  $  33.2  million  24.7%  $  28.8  million 
151
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 APPENDIX  E 
 Licenses  and  Authorizations  to  Be  Transferred 
 The  consolidated  applications  filed  by  Adelphia,  Time  Warner  and  Comcast  include  Commission  authorizations  and  licenses  listed  in  this  Appendix.  They  are  separated  by  the  type  of  authorization  or  license, 
 and,  within  each  category,  listed  by  licensee  name,  application  or  ULS  file  number,  call  sign  or  lead  call  sign  (for  ULS  filings),  and/  or  other  service-  specific  information,  as  appropriate.  Interested  parties  should  refer  to 
 the  applications  for  a  more  detailed  listing  of  the  authorizations  or  licenses.  Each  of  the  Applicants  subsidiaries  or  affiliates  may  hold  multiple  authorizations  or  licenses  of  a  particular  type.  Additional 
 applications  may  have  to  be  filed  to  identify  any  additional  authorizations  involved  in  these  transactions.  The  transactions  involve  a  series  of  discrete  phases  or  steps 


 Part  78    Cable  Television  Relay  Service  (CARS)  1 
 Licenses  to  be  assigned  to  Time  Warner  NY  Cable  LLC 
 File  No.  Licensee  Call  Sign  CAR-  20050520AF-  08  Adelphia  CAVS  of  San  Bernardino,  LLC  (DIP)  WAX-  28 
 CAR-  20050520AG-  08  Adelphia  California  Cablevision,  LLC  (DIP)  WLY-  433  CAR-  20050520AH-  08  Adelphia  Communications  of  CA,  LLC  (DIP)  KD-  55007 
 CAR-  20050520AI-  08  Adelphia  Communications  of  CA,  LLC  (DIP)  WSJ-  903  CAR-  20050520AJ-  08  CDA  Cable,  Inc.  (DIP)  WAD-  611 
 CAR-  20050520AK-  08  CDA  Cable,  Inc.  (DIP)  WHZ-  765  CAR-  20050523AA-  08  Century  TCI-  California,  LP  (DIP)  WLY-  269 
 CAR-  20050523AB-  08  FrontierVision  Operating  Partners,  LP  (DIP)  WSA-  48  CAR-  20050523AC-  08  FrontierVision  Operating  Partners,  LP  (DIP)  WAD-  626 
 CAR-  20050523AD-  08  FrontierVision  Operating  Partners,  LP  (DIP)  WGZ-  433  CAR-  20050523AE-  08  FrontierVision  Operating  Partners,  LP  (DIP)  WGZ-  434 
 CAR-  20050523AF-  08  FrontierVision  Operating  Partners,  LP  (DIP)  WHZ-  446  CAR-  20050523AG-  08  FrontierVision  Operating  Partners,  LP  (DIP)  WLY-  609 
 CAR-  20050523AH-  08  FrontierVision  Operating  Partners,  LP  (DIP)  WLY-  205  CAR-  20050523AI-  08  FrontierVision  Operating  Partners,  LP  (DIP)  WLY-  335 
 CAR-  20050523AJ-  08  FrontierVision  Operating  Partners,  LP  (DIP)  WLY-  399  CAR-  20050523AK-  08  Highland  Carlsbad  Operating  Subsidiary,  Inc.  WGV-  957 
 CAR-  20050523AL-  08  Kootenai  Cable,  Inc.  (DIP)  WGZ-  269  CAR-  20050523AM-  08  Kootenai  Cable,  Inc.  (DIP)  WLY-  662 
 CAR-  20050523AN-  08  Mountain  Cable  Company,  LP  (DIP)  WGZ-  335  CAR-  20050523AO-  08  Mountain  Cable  Company,  LP  (DIP)  WGZ-  413 
 CAR-  20050523AP-  08  Pullman  TV  Cable  Company,  Inc.  (DIP)  WAE-  605  CAR-  20050523AQ-  08  Pullman  TV  Cable  Company,  Inc.  (DIP)  WAE-  606 
 CAR-  20050523AR-  08  Southwest  Colorado  Cable,  Inc.  (DIP)  WHZ-  293  CAR-  20050523AS-  08  Southwest  Colorado  Cable,  Inc.  (DIP)  WHZ-  301 
 CAR-  20050523AT-  08  Yuma  Cablevision,  Inc.  (DIP)  KB-  60101  CAR-  20050523AU-  08  Yuma  Cablevision,  Inc.  (DIP)  WAJ-  458 
 CAR-  20050523AV-  08  Yuma  Cablevision,  Inc.  (DIP)  WLY-  809 
 1  Subsequent  to  the  commencement  of  this  proceeding,  Adelphia  applied  for  and  received  authorizations  for  new 
 CARS  stations,  WLY-  850  and  WLY-  851  (Marthas  Vineyard  Cablevision,  L.  P.,  DIP,  granted  8/  25/  2005)  and  WLY-852  (FrontierVision  Operating  Partners,  L.  P.,  DIP,  granted  10/  17/  2005).  These  systems  are  part  of  these 


 transactions.  We  expect  that  the  parties  will  file  the  requisite  applications  to  complete  approval  of  the  license  transfers. 
152
 Federal  Communications  Commission  FCC  06-  105 
 2 
 CAR-  20050524AP-  08  Century  Cablevision  Holdings,  LLC  (DIP)  WLY-  627 
 Licenses  to  be  assigned  to  CAC  Exchange  I  LLC  File  No.  Licensee  Call  Sign 
 CAR-  20050524AC-  08  Century-  TCI  California,  LP  (DIP)  WHZ-  879  CAR-  20050524AD-  08  Century-  TCI  California,  LP  (DIP)  WHZ-  880 
 CAR-  20050524AE-  08  Century-  TCI  California,  LP  (DIP)  WHZ-  886 
 License  to  be  assigned  to  CAP  Exchange  I  LLC  File  No.  Licensee  Call  Sign 
 CAR-  20050524AF-  08  Parnassoss,  LP  (DIP)  WGH-  439 
 Licenses  to  be  assigned  to  C-  Native  Exchange  I,  LLC  (Pro  forma)  File  No.  Licensee  Call  Sign 
 CAR-  20050524AG-  08  Comcast  of  Los  Angeles,  Inc.  WLY-  348  CAR-  20050524AH-  08  Comcast  of  Los  Angeles,  Inc.  WLY-  501 


 Licenses  to  be  assigned  to  C-  Native  Exchange  III,  LP  (Pro  forma)  File  No.  Licensee  Call  Sign 
 CAR-  20050524AI-  08  Comcast  of  CA/  CO/  IL/  IN/  TX,  Inc.  WHZ-  677  CAR-  20050524AJ-  08  Comcast  of  CA/  CO/  IL/  IN/  TX,  Inc.  WGV-  990 
 CAR-  20050524AK-  08  Comcast  of  CA/  CO/  IL/  IN/  TX,  Inc.  WLY-  812  CAR-  20050524AL-  08  Comcast  of  CA/  CO/  IL/  IN/  TX,  Inc.  WLY-  816 
 CAR-  20050524AM-  08  Comcast  of  CA/  CO/  IL/  IN/  TX,  Inc.  WLY-  817  CAR-  20050524AN-  08  Comcast  of  CA/  CO/  IL/  IN/  TX,  Inc.  WLY-  815 
 CAR-  20050524AO-  08  Comcast  of  Dallas,  LP  KA-  80623 
 Two-  Part  Transactions 
 STEP  1 
 Licenses  to  be  assigned  to  Cable  Holdco  Exchange  II  LLC  File  No.  Licensee  Call  Sign 
 CAR-  20050519AA-  08  Owensboro-  Brunswick,  Inc.  (DIP)  WLY-  810  CAR-  20050519AB-  08  Owensboro-  Brunswick,  Inc.  (DIP)  WLY-  436 
 CAR-  20050519AC-  08  Olympus  Communications,  LP  (DIP)  WLY-  347 
 Licenses  to  be  assigned  to  Cable  Holdco  Exchange  I  LLC  File  No.  Licensee  Call  Sign 
 CAR-  20050519AD-  08  Century  Colorado  Springs  Partnership  (DIP)  WJN-  35  CAR-  20050519AE-  08  Century  Colorado  Springs  Partnership  (DIP)  WLY-  440 
 CAR-  20050519AF-  08  Century  Colorado  Springs  Partnership  (DIP)  WLY-  790  CAR-  20050519AG-  08  Century  Trinidad  Cable  Television  Corp.,  (DIP)  WGI-  777 
 CAR-  20050519AH-  08  Adelphia  Central  Pennsylvania,  LLC  (DIP)  WLY-  512 
 License  to  be  assigned  to  Cable  Holdco  Exchange  IV-  2,  LLC  File  No.  Licensee  Call  Sign 
 CAR-  20050520-  AA-  08  Century  Virginia  Corp.  (DIP)  WHZ-  485 
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 Federal  Communications  Commission  FCC  06-  105 
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 Licenses  to  be  assigned  to  Cable  Holdco  Exchange  V,  LLC  File  No.  Licensee  Call  Sign 
 CAR-  20050520AC-  08  Century  Mendocino  Cable  Television,  Inc.  (DIP)  WAD-  902  CAR-  20050520AD-  08  Century  Mendocino  Cable  Television,  Inc.  (DIP)  WLY-  818 
 CAR-  20050520AE-  08  Century  Mendocino  Cable  Television,  Inc.  (DIP)  WSF-  24 
 License  to  be  assigned  to  Cable  Holdco  II  Inc.  (Pro  forma)  File  No.  Licensee  Call  Sign 
 CAR-  20050523AW-  08  Time  Warner  Inc.  WHZ-  238  CAR-  20050523AX-  08  Time  Warner  Inc.  WHZ-  244 


 STEP  2 
 Control  of  licensee  to  be  transferred  to  Comcast  Corporation 
 File  No.  Licensee  Call  Sign  CAR-  20050523AY-  09  Cable  Holdco  Exchange  I  LLC  WLY-  512 
 CAR-  20050523AZ-  09  Cable  Holdco  Exchange  I  LLC  WJN-  35  CAR-  20050523BA-  09  Cable  Holdco  Exchange  I  LLC  WLY-  440 
 CAR-  20050523BB-  09  Cable  Holdco  Exchange  I  LLC  WLY-  790  CAR-  20050523BC-  09  Cable  Holdco  Exchange  I  LLC  WGI-  777 
 CAR-  20050523BD-  09  Cable  Holdco  Exchange  II  LLC  WLY-  347  CAR-  20050523BE-  09  Cable  Holdco  Exchange  II  LLC  WHZ-  810 
 CAR-  20050523BF-  09  Cable  Holdco  Exchange  II  LLC  WLY-  436  CAR-  20050523BG-  09  Cable  Holdco  Exchange  IV-  2,  LLC  WHZ-  485 
 CAR-  20050523BH-  09  Cable  Holdco  Exchange  V,  LLC  WAD-  902  CAR-  20050523BI-  09  Cable  Holdco  Exchange  V,  LLC  WLY-  818 
 CAR-  20050523BJ-  09  Cable  Holdco  Exchange  V,  LLC  WSF-  24  CAR-  20050524AA-  09  Cable  Holdco  II  Inc.  WHZ-  238 
 CAR-  20050524AB-  09  Cable  Holdco  II  Inc.  WHZ-  244 
 Control  of  licensee  to  be  transferred  to  Time  Warner  Inc. 
 File  No.  Licensee  Call  Sign  CAR-  20050602AA-  09  C-  Native  Exchange  I,  LLC  WLY-  501 
 CAR-  20050602AB-  09  C-  Native  Exchange  I,  LLC  WLY-  348  CAR-  20050602AC-  09  C-  Native  Exchange  III,  LP  WHZ-  677 
 CAR-  20050602AD-  09  C-  Native  Exchange  III,  LP  WGV-  990  CAR-  20050602AE-  09  C-  Native  Exchange  III,  LP  WLY-  812 
 CAR-  20050602AF-  09  C-  Native  Exchange  III,  LP  WLY-  816  CAR-  20050602AG-  09  C-  Native  Exchange  III,  LP  WLY-  817 
 CAR-  20050602AH-  09  C-  Native  Exchange  III,  LP  WLY-  815  CAR-  20050602AI-  09  C-  Native  Exchange  III,  LP  KA-  80623 
 CAR-  20050602AJ-  09  CAC  Exchange  I  LLC  WHZ-  879  CAR-  20050602AK-  09  CAC  Exchange  I  LLC  WHZ-  880 
 CAR-  20050602AL-  09  CAC  Exchange  I  LLC  WHZ-  886  CAR-  20050602AM-  09  CAP  Exchange  I  LLC  WGH-  439 
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 Federal  Communications  Commission  FCC  06-  105 
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 Part  25    Satellite  Communications  2 
 Receive-  Only  Satellite  Earth  Stations  (TVRO) 
 File  No.  Licensee/  Registrant  Call  Sign 
 Adelphia  Cable  Partners,  L.  P.,  (DIP)  E930116  Adelphia  Cable  Partners,  L.  P.,  (DIP)  E950095 
 Adelphia  Cablevision  Associates,  L.  P.,  (DIP)  WJ42  Adelphia  Cablevision  Corp.,  (DIP)  E870268 
 Adelphia  Cablevision  Corp.,  (DIP)  E870269  Adelphia  Cablevision  Corp.,  (DIP)  E9003 
 Adelphia  Cablevision  Corp.,  (DIP)  E9004  Adelphia  Cablevision  Corp.,  (DIP)  E9005 
 Adelphia  Cablevision  of  Boca  Raton,  LLC,  (DIP)  E2072  Adelphia  Cablevision  of  Inland  Empire  LLC,  (DIP)  E2321 
 Adelphia  Cablevision  of  New  York,  Inc.,  (DIP)  E2573  Adelphia  Cablevision  of  New  York,  Inc.,  (DIP)  E870127 
 Adelphia  Cablevision  of  Newport  Beach,  LLC,  (DIP)  KV51  Adelphia  Cablevision  of  Orange  County  II,  LLC,  (DIP)  E4930 
 Adelphia  Cablevision  of  San  Bernardino,  LLC,  (DIP)  E3198  Adelphia  Cablevision  of  Seal  Beach,  LLC,  (DIP)  E7993 
 Adelphia  Cablevision  of  Simi  Valley,  LLC,  (DIP)  KH60  Adelphia  Cablevision  of  West  Palm  Beach  IV,  LLC,  (DIP)  WB57 
 Adelphia  Cablevision  of  West  Palm  Beach,  LLC  E4157  Adelphia  California  Cablevision,  LLC,  (DIP)  E940138 
 Adelphia  California  Cablevision,  LLC,  (DIP)  E950223  Adelphia  California  Cablevision,  LLC,  (DIP)  E950315 
 Adelphia  California  Cablevision,  LLC,  (DIP)  E960066  Adelphia  California  Cablevision,  LLC,  (DIP)  E960140 
 Adelphia  California  Cablevision,  LLC,  (DIP)  E960141  Adelphia  California  Cablevision,  LLC,  (DIP)  E960153 
 Adelphia  California  Cablevision,  LLC,  (DIP)  E970171  Adelphia  California  Cablevision,  LLC,  (DIP)  E970172 
 Adelphia  California  Cablevision,  LLC,  (DIP)  E970173  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E010259 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E2404 
 2  We  note  that  assignment  applications  for  receive-  only  FCC  earth  station  licenses  held  by  Adelphia  and  subject  to 
 the  Asset  Purchase  Agreement  have  not  been  filed  as  of  this  date.  In  the  case  of  receive-  only  earth  stations,  our  procedures  do  not  require  the  filing  of  transfer  or  assignment  applications,  but  instead  require  that  the  Applicants 


 report  the  changes  in  station  operator  on  FCC  Form  312  and  Schedule  A.  These  changes  are  then  published  in  the  International  Bureaus  routine  Actions  Taken  public  notices  and  recorded  in  the  Bureaus  appropriate  data  base.  See 
 Deregulation  of  Domestic  Receive-  Only  Satellite  Earth  Stations,  104  F.  C.  C.  2d  348,  353  (1986);  New  Rules  for  Part  25    Satellite  Communications,  6  FCC  Rcd  3738  (1991);  Implementation  of  New  Part  25  Regulations  for  Satellite 
 Space  and  Earth  Station  Application  and  Licensing  Procedures,  12  FCC  Rcd  13850  (1997).  Thus,  following  consummation  of  the  transactions  approved  herein,  the  Applicants  should  report  changes  in  the  ownership  of  the 
 receive-  only  earth  stations  listed  above  on  FCC  Form  312  and  Schedule  A  as  required  by  our  rules.  As  we  view  these  receive-  only  earth  stations  within  the  scope  of  the  transactions  reviewed  in  this  proceeding,  FCC  publication  of 
 the  assignment  of  the  receive-  only  earth  stations  will  provide  notification  of  the  change  of  ownership  as  set  forth  in  the  filed  FCC  Form  312  assignment  applications  and  consistent  with  this  Order. 
155
 Federal  Communications  Commission  FCC  06-  105 
 5 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E2489  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E2629 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E2723  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E2779 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E3491  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E5083 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E5295  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E6210 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E6449  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E859861 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E860973  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E870893 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E870897  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E873416 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E873418  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E873419 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E873420  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E873614 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E873621  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E873624 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E873625  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E873634 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E881253  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E890358 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  E960299  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  WF93 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  WN32  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  WQ77 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  WR73  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  WS55 
 Adelphia  Central  Pennsylvania,  LLC,  (DIP)  WS91  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  WU94 
 Adelphia  Cleveland  LLC,  (DIP)  WG76  Adelphia  Communications  of  California  II,  LLC,  (DIP)  KW80 
 Adelphia  Communications  of  California,  LLC,  (DIP)  E6474  Adelphia  Communications  of  California,  LLC,  (DIP)  E9439 
 Adelphia  Communications  of  California,  LLC,  (DIP)  KK81  Adelphia  Company  of  Western  Connecticut,  (DIP)  E6301 
 Adelphia  Company  of  Western  Connecticut,  (DIP)  E910437  Adelphia  GS  Cable,  LLC,  (DIP)  E860282 
 Adelphia  of  the  Midwest,  Inc.,  (DIP)  E5927  Adelphia  of  the  Midwest,  Inc.,  (DIP)  E8221 
 Adelphia  of  the  Midwest,  Inc.,  (DIP)  E860681  Adelphia  of  the  Midwest,  Inc.,  (DIP)  E860682 
 Adelphia  of  the  Midwest,  Inc.,  (DIP)  E865184  Better  TV,  Inc.  of  Bennington,  (DIP)  E860184 
 Blacksburg/  Salem  Cablevision,  Inc.,  (DIP)  WH56  Blacksburg/  Salem  Cablevision,  Inc.,  (DIP)  WS39 
 CDA  Cable,  Inc.,  (DIP)  E890126  CDA  Cable,  Inc.,  (DIP)  KJ94 
 Century  Alabama  Corp.,  (DIP)  WP46  Century  Cable  Holdings  LLC,  (DIP)  E3952 
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 Federal  Communications  Commission  FCC  06-  105 
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 Century  Carolina  Corporation,  (DIP)  E3618  Century  Carolina  Corporation,  (DIP)  E3876 
 Century  Carolina  Corporation,  (DIP)  E5060  Century  Colorado  Springs  Partnership,  (DIP)  E890028 
 Century  Cullman  Corp.,  (DIP)  E880474  Century  Enterprise  Cable  Corp.,  (DIP)  E6900 
 Century  Huntington  Company,  (DIP)  E4010  Century  Island  Associates,  Inc.,  (DIP)  E881189 
 Century  Kansas  Cable  Television  Corp.  (DIP)  KF77  Century  Lykens  Cable  Corp.,  (DIP)  WV35 
 Century  Mendocino  Cable  Television  Inc.,  (DIP)  E3634  Century  Mendocino  Cable  Television  Inc.,  (DIP)  E910122 
 Century  Norwich  Corp.,  (DIP)  WT81  Century  Ohio  Cable  Television  Corp.,  (DIP)  E2369 
 Century  Ohio  Cable  Television  Corp.,  (DIP)  WS44  Century  Trinidad  Cable  Television  Corp.,  (DIP)  KJ41 
 Century  Virginia  Corp.,  (DIP)  WP43  Century-  TCI  California,  L.  P.,  (DIP)  E2558 
 Century-  TCI  California,  L.  P.,  (DIP)  E3075  Century-  TCI  California,  L.  P.,  (DIP)  E3118 
 Century-  TCI  California,  L.  P.,  (DIP)  E5954  Century-  TCI  California,  L.  P.,  (DIP)  E5975 
 Century-  TCI  California,  L.  P.,  (DIP)  E6438  Century-  TCI  California,  L.  P.,  (DIP)  E7924 
 Century-  TCI  California,  L.  P.,  (DIP)  E860955  Century-  TCI  California,  L.  P.,  (DIP)  E881085 
 Century-  TCI  California,  L.  P.,  (DIP)  E890795  Century-  TCI  California,  L.  P.,  (DIP)  E940504 
 Century-  TCI  California,  L.  P.,  (DIP)  E960176  Century-  TCI  California,  L.  P.,  (DIP)  KG94 
 Century-  TCI  California,  L.  P.,  (DIP)  KM99  Chelsea  Communications,  LLC,  (DIP)  E2022 
 Chelsea  Communications,  LLC,  (DIP)  E2471  Chelsea  Communications,  LLC,  (DIP)  E2746 
 Chelsea  Communications,  LLC,  (DIP)  E3049  Chelsea  Communications,  LLC,  (DIP)  E3073 
 Chelsea  Communications,  LLC,  (DIP)  E3284  Chelsea  Communications,  LLC,  (DIP)  E4086 
 Chelsea  Communications,  LLC,  (DIP)  E4315  Chelsea  Communications,  LLC,  (DIP)  E4472 
 Chelsea  Communications,  LLC,  (DIP)  E6002  Chelsea  Communications,  LLC,  (DIP)  E865079 
 Chelsea  Communications,  LLC,  (DIP)  E9117  Chelsea  Communications,  LLC,  (DIP)  E950352 
 Chelsea  Communications,  LLC,  (DIP)  E960172  Chelsea  Communications,  LLC,  (DIP)  WM92 
 Chelsea  Communications,  LLC,  (DIP)  WM93  Chelsea  Communications,  LLC,  (DIP)  WY73 
 Chelsea  Communications,  LLC,  (DIP)  WY83  Comcast  of  California  I,  LLC  E874302 
 Comcast  of  California  I,  LLC  E874303  Comcast  of  California  I,  LLC  E874304 
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 Federal  Communications  Commission  FCC  06-  105 
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 Comcast  of  California  VII,  Inc.  KL47  Comcast  of  California/  Colorado/  Illinois/  Indiana/  Texas,  Inc.  E2124 
 Comcast  of  California/  Colorado/  Illinois/  Indiana/  Texas,  Inc.  E2527  Comcast  of  California/  Colorado/  Illinois/  Indiana/  Texas,  Inc.  E3672 
 Comcast  of  California/  Colorado/  Illinois/  Indiana/  Texas,  Inc.  KZ97  Comcast  of  Costa  Mesa,  Inc.  E860337 
 Comcast  of  Cypress,  Inc.  E860336  Comcast  of  Dallas,  LP  E3107 
 Comcast  of  Dallas,  LP  E891027  Comcast  of  Dallas,  LP  E900497 
 Comcast  of  Illinois/  Texas,  Inc.  KJ44  Comcast  of  Illinois/  Texas,  Inc.  KL41 
 Comcast  of  Indiana/  Michigan/  Texas,  LP  E4090  Comcast  of  Indiana/  Michigan/  Texas,  LP  E940277 
 Comcast  of  Los  Angeles,  Inc.  E2480  Comcast  of  Los  Angeles,  Inc.  E3882 
 Comcast  of  Los  Angeles,  Inc.  E4239  Comcast  of  Los  Angeles,  Inc.  E5048 
 Comcast  of  Los  Angeles,  Inc.  E5057  Comcast  of  Los  Angeles,  Inc.  E873365 
 Comcast  of  Los  Angeles,  Inc.  E874223  Comcast  of  Los  Angeles,  Inc.  E880022 
 Comcast  of  Los  Angeles,  Inc.  E880023  Comcast  of  Los  Angeles,  Inc.  E880024 
 Comcast  of  Massachusetts/  New  Hampshire/  Ohio,  Inc.  E900577  Comcast  of  Massachusetts/  New  Hampshire/  Ohio,  Inc.  E920188 
 Comcast  of  Newhall,  Inc.  KP72  Comcast  of  Plano,  LP  E6596 
 Comcast  of  Richardson,  LP  E6150  Comcast  of  Texas  I,  LP  KE90 
 Comcast  of  Texas  II,  LP  E5358  Comcast  of  Texas  II,  LP  E5587 
 Comcast  of  Texas  II,  LP  E5602  Comcast  of  Texas  II,  LP  E870041 
 Comcast  of  Texas  II,  LP  E900498  Comcast  of  Texas  II,  LP  KR52 
 Desert  Hot  Springs  Cablevision,  Inc.  E3238  Eastern  Virginia  Cablevision,  L.  P.,  (DIP)  WF57 
 FOP  Indiana,  L.  P.,  (DIP)  E4341  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E010103 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E2018  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E2364 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E2379  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E2422 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E2425  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E2426 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E2427  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E2477 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E2818  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E3190 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E3505  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E3506 
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 Federal  Communications  Commission  FCC  06-  105 
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 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E3542  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E3550 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E3551  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E3571 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E3838  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E3839 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E3840  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E3887 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E4338  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E4448 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E5020  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E5498 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E6130  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E6191 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E6333  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E6338 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E7300  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E8325 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E859862  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E870266 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E870271  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E870272 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E890880  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E890881 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E890882  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E890886 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E890887  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E890888 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E890889  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E890890 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E890891  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E890947 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E900326  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E900327 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E900328  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E900386 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E900387  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E900388 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E900679  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E900963 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E910224  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E9194 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E920508  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E920509 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E930144  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  E980264 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  WE47  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  WF85 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  WL29  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  WQ28 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  WS36  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  WT23 
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 Federal  Communications  Commission  FCC  06-  105 
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 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  WT30  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  WT31 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  WV36  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  WX39 
 FrontierVision  Operating  Partners,  L.  P.,  (DIP)  WY82  Global  Acquisition  Partners,  L.  P.,  (DIP)  WL25 
 Highland  Carlsbad  Operating  Subsidiary,  Inc.  E3199  Highland  Carlsbad  Operating  Subsidiary,  Inc.  E3201 
 Highland  Video  Associates,  L.  P.  E920253  Hilton  Head  Communications,  L.  P.  WG36 
 Imperial  Valley  Cablevision,  Inc.,  (DIP)  KB97  KBL  Cablesystems  of  Minneapolis,  LP  E6737 
 Key  Biscayne  Cablevision,  (DIP)  E7027  Kootenai  Cable,  Inc.,  (DIP)  E880393 
 Kootenai  Cable,  Inc.,  (DIP)  E880850  Kootenai  Cable,  Inc.,  (DIP)  E880852 
 Martha's  Vineyard  Cablevision,  L.  P.,  (DIP)  E9032  Mickelson  Media,  Inc.,  (DIP)  E2983 
 Mountain  Cable  Company,  L.  P.,  (DIP)  E3490  Mountain  Cable  Company,  L.  P.,  (DIP)  E3533 
 Mountain  Cable  Company,  L.  P.,  (DIP)  E3534  Mountain  Cable  Company,  L.  P.,  (DIP)  E4438 
 Mountain  Cable  Company,  L.  P.,  (DIP)  E4439  Mountain  Cable  Company,  L.  P.,  (DIP)  E4853 
 Mountain  Cable  Company,  L.  P.,  (DIP)  E900789  Mountain  Cable  Company,  L.  P.,  (DIP)  E910277 
 National  Cable  Acquisition  Associates,  L.  P.,  (DIP)  E900329  National  Cable  Acquisition  Associates,  L.  P.,  (DIP)  E940171 
 Owensboro-  Brunswick,  Inc.,  (DIP)  WB50  Owensboro-  Brunswick,  Inc.,  (DIP)  WE75 
 Parnassos,  L.  P.,  (DIP)  E2562  Parnassos,  L.  P.,  (DIP)  E3436 
 Parnassos,  L.  P.,  (DIP)  E4478  Parnassos,  L.  P.,  (DIP)  E850287 
 Parnassos,  L.  P.,  (DIP)  E859968  Parnassos,  L.  P.,  (DIP)  E865088 
 Parnassos,  L.  P.,  (DIP)  E880888  Parnassos,  L.  P.,  (DIP)  E890830 
 Parnassos,  L.  P.,  (DIP)  E930438  Parnassos,  L.  P.,  (DIP)  WB58 
 Parnassos,  L.  P.,  (DIP)  WG77  Parnassos,  L.  P.,  (DIP)  WY93 
 Pullman  TV  Cable  Co.,  Inc.,  (DIP)  KK46  Rentavision  of  Brunswick,  Inc.,  (DIP)  WX31 
 Scranton  Cablevision,  Inc.,  (DIP)  E3259  Southeast  Florida  Cable,  Inc.,  (DIP)  E2391 
 Southeast  Florida  Cable,  Inc.,  (DIP)  E5611  Southeast  Florida  Cable,  Inc.,  (DIP)  E930117 
 Southeast  Florida  Cable,  Inc.,  (DIP)  E930155  Southeast  Florida  Cable,  Inc.,  (DIP)  E930156 
 Southeast  Florida  Cable,  Inc.,  (DIP)  WJ23  Southeast  Florida  Cable,  Inc.,  (DIP)  WM59 
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 Southwest  Colorado  Cable,  Inc.,  (DIP)  E6756  Southwest  Colorado  Cable,  Inc.,  (DIP)  E880841 
 SVHH  Cable  Acquisition,  L.  P.,  (DIP)  E3192  SVHH  Cable  Acquisition,  L.  P.,  (DIP)  E3193 
 SVHH  Cable  Acquisition,  L.  P.,  (DIP)  WH21  SVHH  Cable  Acquisition,  L.  P.,  (DIP)  WR89 
 SVHH  Cable  Acquisition,  L.  P.,  (DIP)  WR90  Three  Rivers  Cable  Associates,  L.  P.,  (DIP)  E865158 
 Three  Rivers  Cable  Associates,  L.  P.,  (DIP)  E970379  Time  Warner  Cable  Inc.  E5279 
 Time  Warner  Cable  Inc.  E5965  Time  Warner  Cable  Inc.  E6144 
 Time  Warner  Cable  Inc.  E860479  Time  Warner  Cable  Inc.  E880383 
 Time  Warner  Cable  Inc.  WR53  Time  Warner  Entertainment  Co.,  L.  P.  E2481 
 Time  Warner  Entertainment  Co.,  L.  P.  E3256  Time  Warner  Entertainment  Co.,  L.  P.  E3561 
 Time  Warner  Entertainment  Co.,  L.  P.  E4281  Time  Warner  Entertainment  Co.,  L.  P.  E4433 
 Time  Warner  Entertainment  Co.,  L.  P.  E4513  Time  Warner  Entertainment  Co.,  L.  P.  E5382 
 Time  Warner  Entertainment  Co.,  L.  P.  E871302  Time  Warner  Entertainment  Co.,  L.  P.  E910123 
 Time  Warner  Entertainment  Co.,  L.  P.  E920573  Time  Warner  Entertainment  Co.,  L.  P.  E920598 
 Time  Warner  Entertainment  Co.,  L.  P.  KD51  Time  Warner  Entertainment  Co.,  L.  P.  KD80 
 Time  Warner  Entertainment  Co.,  L.  P.  KR31  Time  Warner  Entertainment  Co.,  L.  P.  WB46 
 Time  Warner  Entertainment  Co.,  L.  P.  WL84  Time  Warner  Entertainment  Co.,  L.  P.  WZ34 
 Time  Warner  Entertainment-  Advance/  Newhouse  Partnership  KY26  UCA,  LLC,  (DIP)  E2442 
 UCA,  LLC,  (DIP)  E5674  UCA,  LLC,  (DIP)  E6617 
 UCA,  LLC,  (DIP)  E872136  UCA,  LLC,  (DIP)  E880113 
 UCA,  LLC,  (DIP)  E890798  UCA,  LLC,  (DIP)  E890832 
 UCA,  LLC,  (DIP)  E910144  UCA,  LLC,  (DIP)  E920186 
 UCA,  LLC,  (DIP)  E920351  UCA,  LLC,  (DIP)  E940507 
 UCA,  LLC,  (DIP)  E980528  UCA,  LLC,  (DIP)  WF73 
 UCA,  LLC,  (DIP)  WF74  UCA,  LLC,  (DIP)  WL90 
 UCA,  LLC,  (DIP)  WM60  UCA,  LLC,  (DIP)  WP39 
 UCA,  LLC,  (DIP)  WU55  Valley  Video,  Inc.,  (DIP)  WQ39 
161
 Federal  Communications  Commission  FCC  06-  105 
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 Western  NY  Cablevision,  L.  P.,  (DIP)  WB77  Yuma  Cablevision,  Inc.,  (DIP)  E3293 
 Yuma  Cablevision,  Inc.,  (DIP)  KB62 


 Section  214  Authorizations 
 Part  63    Domestic  Section  214  Authority 
 The  Applicants  have  filed  four  applications  for  consent  to  the  transfer  of  control  of  domestic  section  214  authority  in  connection  with  the  transactions  described  above.  3 


 Parts  90  and  101    Wireless  Radio  Services  Applications 
 File  No.  Licensee  Lead  Call  Sign  0002159061  Adelphia  Cablevision  of  New  York  Inc,  (DIP)  KEY243 
 0002159194  Adelphia  Cablevision  of  the  Kennebunks,  LLC,  (DIP)  KNJD338  0002159198  Adelphia  Cleveland  LLC,  (DIP)  WNKS662 
 0002159211  Adelphia  California  Cablevision,  LLC,  (DIP)  WNTM202  0002159215  Adelphia  Communications  of  California  II,  LLC,  (DIP)  KTM739 
 0002159217  Adelphia  of  the  Midwest  Inc,  LLC,  (DIP)  KNFK941  0002159219  CDA  Cable,  Inc.,  (DIP)  KNIK432 
 0002159222  Century  Alabama  Corp.,  (DIP)  WXV338  0002159225  Century  Berkshire  Cable  Corp.,  (DIP)  KNDV713 
 0002159227  Century  Cable  Holdings  LLC,  (DIP)  KXO480  0002159229  Century  Carolina  Corporation,  (DIP)  KYA708 
 0002159232  Century  Cullman  Corp.,  (DIP)  KNCS964  0002159234  Century  Island  Associates,  Inc.,  (DIP)  WNMX369 
 0002159236  Century  Kansas  Cable  Television  Corp.  (DIP)  WNRC522  0002159240  Century  Mississippi  Corp.,  (DIP)  WRK611 
 0002159242  Century  Ohio  Cable  Television  Corp.,  (DIP)  WNMD682  0002159244  Century  Wyoming  Cable  Corp.,  (DIP)  KNFN972 
 0002159248  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  KAI939  0002159251  Hilton  Head  Communications,  L.  P.  WCW237 
 0002159253  Kootenai  Cable,  Inc.,  (DIP)  KNDK239  0002159255  Mountain  Cable  Company,  L.  P.,  (DIP)  KST750 
 0002159258  Owensboro-  Brunswick,  Inc.,  (DIP)  KNEP792  0002159261  Parnassos,  L.  P.,  (DIP)  WPCI360 
 0002159263  Southwest  Colorado  Cable,  Inc.,  (DIP)  KNHM865  0002159265  SVHH  Cable  Acquisition,  L.  P.,  (DIP)  KNHB711 
 0002159267  UCA,  LLC,  (DIP)  KNEP681  0002159270  Valley  Video  Inc.,  (DIP)  WPHV911 
 0002159276  Wellsville  Cablevision,  L.  L.  C.,  (DIP)  KNEW327  0002159279  Yuma  Cablevision,  Inc.,  (DIP)  KBL655 
 0002159737  Adelphia  Central  Pennsylvania,  LLC,  (DIP)  KAV983 


 3  The  Applicants  have  filed  applications  for  consent  to  transfer  of  control  of  domestic  214  authority  from 
 1)  Adelphia  to  Time  Warner,  2)  Adelphia  to  Comcast,  3)  Comcast  to  Time  Warner,  and  4)  Time  Warner  to  Comcast. 
162
 Federal  Communications  Commission  FCC  06-  105 
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 0002159755  Adelphia  GS  Cable,  LLC,  (DIP)  WNKH753  0002159758  Century  Colorado  Springs  Partnership,  (DIP)  WNNY662 
 0002159788  Century  Huntington  Company,  (DIP)  WNQR362  0002159764  Century  Lykens  Cable  TV  Communications  Corp.  KNIM644 
 0002159767  Century  Trinidad  Cable  Television  Corp.,  (DIP)  KJE667  0002159792  Chelsea  Communications,  L.  L.  C.,  (DIP)  KNJM834 
 0002159800  Scranton  Cablevision,  Inc.,  (DIP)  KVN239  0002159864  Mickelson  Media  of  Florida,  Inc.,  (DIP)  WNNQ866 
 0002159875  Owensboro-  Brunswick,  Inc.,  (DIP)  WPZT290  0002159879  Ionian  Communications,  L.  P.  KGE914 
 0002159883  West  Boca  Acquisition,  L.  P.,  (DIP)  WSQ484  0002159885  SVHH  Cable  Acquisition,  L.  P.,  (DIP)  WSF832 
 0002159897  Adelphia  Company  of  Western  Connecticut,  (DIP)  KUP796  0002159902  Better  TV,  Inc.  of  Bennington,  (DIP)  WNJN274 
 0002159909  FrontierVision  Operating  Partners,  L.  P.,  (DIP)  KNIN723  0002159912  Lake  Champlain  Cable  Television  Corporation,  (DIP)  WNGM596 
 0002159916  Mountain  Cable  Company,  L.  P.,  (DIP)  KNEV877  0002159919  Multi-  Channel  T.  V.  Cable  Company,  (DIP)  KNAV853 
 0002159923  Three  Rivers  Cable  Associates,  L.  P.,  (DIP)  WNQL889  0002159926  UCA,  LLC,  (DIP)  KUJ362 
 0002159931  Century-  TCI  California,  L.  P.,  (DIP)  WNMF308  0002448868  4  Adelphia  California  Cablevision,  LLC,  (DIP)  WNTS945 
 0002159960  Adelphia  of  the  Midwest,  Inc.,  (DIP)  KNJH360  0002159976  Parnassos,  L.  P.,  (DIP)  WNAU571 
 0002159981  Western  NY  Cablevision,  L.  P.,  (DIP)  KVG330  0002160103  Adelphia  Cable  Partners  L.  P.,  (DIP)  KNBQ811 
 0002160109  Cowlitz  Cablevision,  Inc.,  (DIP)  KGQ685  0002163779  Century  Huntington  Company,  (DIP)  KIN464 
 0002164332  Adelphia  GS  Cable,  LLC,  (DIP)  WNFQ557  0002164346  Adelphia  Prestige  Cablevision,  LLC,  (DIP)  KNCR396 
 0002164356  Century  Mendocino  Cable  Television,  Inc.,  (DIP)  WNMD760  0002164364  Chelsea  Communications,  LLC,  (DIP)  KUW324 
 0002164373  GS  Cable,  LLC,  (DIP)  KUP756  0002164379  Wilderness  Cable  Company,  (DIP)  KME372 


 Listed  below  are  Pro  Forma  Assignment  applications: 
 0002164979  Time  Warner  Entertainment  Co.,  L.  P.  WQG372  0002165002  Time  Warner  Entertainment/  KUC787 
 Advance-  Newhouse  Partnership  0002165020  Time  Warner  Cable  Inc.  KNHA621 
 0002165560  Comcast  of  Los  Angeles,  Inc  WNTD907  0002165601  Comcast  of  Massachusette/  New  Hampshire/  Ohio,  Inc.  WQW327 
 0002165658  Comcast  of  Illinois/  Texas,  Inc.  WNYE223  0002165666  Comcast  of  Richardson,  LP  KNHC697 
 0002165682  Comcast  of  Texas,  LLC  KNAW439 


 4  Original  file  0002159943  was  dismissed  and  replaced  with  file  0002448868  for  purely  administrative  reasons. 
 There  were  no  substantive  changes. 
163
 Federal  Communications  Commission  FCC  06-  105 
 13 
 Step-  Two  Transactions  5 
 File  Number  Licensee  Lead  Call  Sign  50006GBTC05  CAP  Exchange  I,  LLC  KNJH360 
 50007IGTC05  CAC  Exchange  I,  LLC  WNXG511  50008IGTC05  Cable  Holdco  Exchange  IV-  3,  LLC  KIN464 
 50009IGTC05  Cable  Holdco  Exchange  II  LLC  WNNQ866  50010IGTC05  C-  Native  Exchange  II,  LP  KNCT914 
 50011IGTC05  Cable  Holdco  Exchange  III,  LLC  KUP796  50012IGTC05  C-  Native  Exchange  I,  LLC  WQW327 
 50013IGTC05  Cable  Holdco  Exchange  IV  LLC  KNBQ811  50014IGTC05  C-  Native  Exchange  III,  LP  WNYE223 
 50015IGTC05  Cable  Holdco  Exchange  I  LLC  KAV983  50016IGTC05  Cable  Holdco  III,  LLC  KUC787 
 50017IGTC05  Cable  Holdco  II,  Inc.  WSW583  50018IGTC05  Cable  Holdco  Exchange  V,  LLC  WPPW503 
 50019MGTC05  CAC  Exchange  I,  LLC  WNTS945  50020MGTC05  C-  Native  Exchange  I,  LLC  WNTD907 


 5  These  transfer  of  control  applications  reflect  proposed  step-  two  transactions  that  are  to  occur  after  the  associated 
 assignment  application  is  approved,  and  the  assignment  is  consummated.  They  have  been  filed  manually  because  the  listed  licensee  in  the  transfer  of  control  application  is  not  the  current  licensee  of  record,  but  the  entity  that  will 


 become  the  licensee  of  record  only  after  consummation  of  the  proposed  step-  one  assignment.  Some  licenses  may  be  involved  in  two  transactions  in  connection  with  the  proposed  transactions.  See  Attachment  for  cross-  references 
 between  file  numbers  for  Step-  One  and  Step-  Two  transactions. 
164
 Federal  Communications  Commission  FCC  06-  105 
 14 
 Attachment 
 The  table  below  cross-  references  the  "step-  one"  assignment  applications  with  the  associated  "step-  two"  transfer  of  control  applications  for  the  wireless  radio  licenses. 


 Assignment  File  Number  Transfer  of  Control  File  Number  0002159960  50006GBTC05 
 0002159976  50006GBTC05  0002159981  50006GBTC05 
 0002159931  50007IGTC05  0002163779  50008IGTC05 
 0002159864  50009IGTC05  0002159875  50009IGTC05 
 0002159883  50009IGTC05  0002165682  50010IGTC05 
 0002159897  50011IGTC05  0002159902  50011IGTC05 
 0002159909  50011IGTC05  0002159912  50011IGTC05 
 0002159916  50011IGTC05  0002159919  50011IGTC05 
 0002159923  50011IGTC05  0002159926  50011IGTC05 
 0002165601  50012IGTC05  0002160103  50013IGTC05 
 0002160109  50013IGTC05  0002165658  50014IGTC05 
 0002165666  50014IGTC05  0002159737  50015IGTC05 
 0002159755  50015IGTC05  0002159758  50015IGTC05 
 0002159764  50015IGTC05  0002159767  50015IGTC05 
 0002159788  50015IGTC05  0002159792  50015IGTC05 
 0002159800  50015IGTC05  0002165002  50016IGTC05 
 0002164979  50017IGTC05  0002165020  50017IGTC05 
 0002164332  50018IGTC05  0002164346  50018IGTC05 
 0002164356  50018IGTC05  0002164364  50018IGTC05 
 0002164373  50018IGTC05  0002164379  50018IGTC05 
 0002448868  6  50019MGTC05  0002165560  50020MGTC05 


 6  See  supra  note  4. 
165
 Federal  Communications  Commission  FCC  06-  105 
 STATEMENT  OF  CHAIRMAN  KEVIN  J.  MARTIN 


 Re:  Applications  for  Consent  to  the  Assignment  and/  or  Transfer  of  Control  of  Licenses;  Adelphia  Communications  Corporation  (and  subsidiaries,  debtors-  in-  possession),  Assignors,  to  Time  Warner 
 Cable  Inc.  (subsidiaries),  Assignees;  Adelphia  Communications  Corporation  (and  subsidiaries,  debtors-in-  possession),  Assignors  and  Transferors,  to  Comcast  Corporation  (subsidiaries),  Assignees  and 
 Transferees;  Comcast  Corporation,  Transferor,  to  Time  Warner  Inc.,  Transferee;  Time  Warner  Inc.,  Transferor  to  Comcast  Corporation,  Transferee,  Memorandum  Opinion  and  Order  (MB  Docket  No.  05- 
 192). 
 I  am  pleased  that  the  Commission  has  voted  to  approve  these  transactions  on  a  bipartisan  basis.  I  believe  that,  on  balance,  the  transactions  as  conditioned  will  further  the  public  interest. 


 The  acquisition  of  the  Adelphia  systems,  currently  in  bankruptcy,  should  bring  significant  benefits  to  the  customers  of  those  systems.  Comcast  and  Time  Warner  have  committed  to  make  long-  needed  upgrades 
 to  those  systems  to  enable  the  rapid  and  widespread  deployment  of  advanced  services  to  Adelphia  subscribers. 


 I  was  concerned  that  the  transactions  raised  the  potential  for  harm  to  competition  in  markets  where  Comcast  or  Time  Warner  has  an  affiliated  regional  sports  network  (  RSN).  As  the  Commission  noted  in 
 its  approval  of  News  Corp.  s  acquisition  of  DirecTV,  viewers  consider  the  programming  that  RSNs  carry  as  must  have  TV.  While  a  new  entrant  or  competing  multi-  channel  video  programming  distributor 
 (  MVPD)  could  create  a  substitute  if  denied  access  to  a  local  news  channel,  for  instance,  it  could  not  create  a  substitute  for  the  games  of  a  popular  local  sports  team.  In  North  Carolina,  there  is  no  substitute 
 for  Tarheel  basketball.  As  a  result,  we  conditioned  approval  of  the  News  Corp./  DirecTV  transaction  on  a  requirement  that  News  Corp.  make  its  affiliated  RSNs  available  to  other  MVPDs  and,  if  the  parties  were 
 not  able  to  reach  an  agreement  on  the  terms  and  conditions,  the  MVPD  could  request  binding  arbitration.  We  adopt  the  same  condition  here:  Time  Warner  and  Comcast  must  make  their  affiliated  RSNs  available 
 to  other  MVPDs  and,  if  the  parties  are  not  able  to  reach  an  agreement,  the  MVPD  can  request  arbitration.  I  believe  this  condition  addresses  the  potential  for  anti-  competitive  behavior  and  facilitates  the  ability  of 
 parties  to  compete  with  the  incumbent  cable  operator,  to  the  benefit  of  consumers. 
 The  other  Commissioners  in  the  majority  also  tried  to  address  a  number  of  other  potential  harms.  Commissioner  Tate  raised  concerns  about  access  to  childrens  programming.  Commissioner  McDowell 
 and  Commissioner  Adelstein  raised  concerns  about  MASN  and  other  independent  RSNs  being  carried,  and  Commissioner  Adelstein  also  raised  concerns  about  how  other  independent  programmers  could  use 
 our  leased  access  rules.  All  four  of  us  in  the  majority  worked  hard  to  address  these  concerns,  and  I  appreciate  all  of  their  efforts.  I  am  pleased  that,  in  the  end,  we  could  find  a  way  to  address  these  concerns 
 in  a  limited  way  and  enhance  consumers  access  to  a  variety  of  programming  and  service  options. 
 In  the  end  there  was  still  some  disagreement  on  net  neutrality.  This  should  not  be  a  surprise,  as  there  is  not  consensus  on  net  neutrality  within  the  industry  or  among  policy  experts.  I  continue  to  support  the 
 principles  we  adopted  last  summer.  However,  I  do  not  think  requirements  are  necessary  at  this  time  without  evidence  of  actual  harm  to  consumers  or  internet  users.  The  Commission  has,  and  will  continue 
 to,  monitor  the  situation  and  will  not  hesitate  to  take  action  to  protect  consumers  when  necessary. 
166
 Federal  Communications  Commission  FCC  06-  105 
 2 
 DISSENTING  STATEMENT  OF  COMMISSIONER  MICHAEL  J.  COPPS 
 Re:  Applications  for  Consent  to  the  Assignment  and/  or  Transfer  of  Control  of  Licenses;  Adelphia  Communications  Corporation  (and  subsidiaries,  debtors-  in-  possession),  Assignors,  to  Time  Warner 
 Cable  Inc.  (subsidiaries),  Assignees;  Adelphia  Communications  Corporation  (and  subsidiaries,  debtors-in-  possession),  Assignors  and  Transferors,  to  Comcast  Corporation  (subsidiaries),  Assignees  and 
 Transferees;  Comcast  Corporation,  Transferor,  to  Time  Warner  Inc.,  Transferee;  Time  Warner  Inc.,  Transferor  to  Comcast  Corporation,  Transferee,  Memorandum  Opinion  and  Order  (MB  Docket  No.  05- 
 192).  In  transactions  coming  before  this  Commission,  my  obligation  is  to  weigh  their  promised  benefits 
 against  their  potential  harms.  This  particular  transaction  is  not  without  positive  attributes,  but  to  me  the  potential  harms  clearly  and  substantially  outweigh  the  benefits.  That  is  why  I  will  dissent  from  todays 
 order.  The  potential  for  harm  here  is  in  the  sheer  economic  power  of  distribution  and  content  that  can,  and  likely  will,  ensue.  While  rescuing  Adelphia  from  the  perils  of  bankruptcy  is  laudable,  the  anti-competitive 
 division  of  assets  proposed  by  the  Applicants  is  not.  The  swapping  of  media  properties  contemplated  by  these  two  giants  has  the  clear  potential,  even  the  probability,  of  limiting  competition  in 
 numerous  media  markets  across  the  country.  Nothing  in  this  Order  can  rebut  the  simple  truth  that  less  competition  equals  higher  prices.  Indeed,  when  you  step  back  and  look  at  the  totality  of  these  proposed 
 transactions,  the  direction  here  is  unmistakable:  this  decision  is  about  Big  Media  getting  bigger,  with  consumers  left  holding  the  bag.  There  are  those  in  industry  trying  to  lull  America  into  complacency  by 
 claiming  that  media  industry  consolidation  has  run  its  course  and  we  neednt  worry  about  it  any  longer.  This  transaction  proves  them  wrong.  More  than  3300  FCC  approvals  of  media  property  assignment  and 
 transfer  grants  over  the  past  three  years  prove  them  wrong.  Believe  me,  this  party  is  far  from  over. 
 Let  me  state  upfront  that  the  Applicants  come  to  us  with  what  I  believe  is  a  commitment  to  update  and  upgrade  the  failing  Adelphia  cable  systems.  I  commend  their  intention  to  modernize  these  networks. 
 But  it  comes  with  too  heavy  a  price  tag  swaps  between  Comcast  and  Time  Warner  that  will  result  in  even  more  cable  concentration  in  numerous  markets.  If  you  live  in  Pennsylvania,  Minnesota,  Southern 
 Florida,  Washington,  D.  C.,  Maryland,  Virginia,  New  England,  Western  New  York,  Ohio,  Texas,  Southern  California,  North  Carolina  or  South  Carolina,  you  will  face  increased  concentration  and  all  that 
 it  entails  as  a  result  of  these  swaps.  In  some  markets,  the  percentage  of  homes  covered  will  hover  as  high  as  95  percent.  The  application  and  the  Order  may  talk  about  geographic  rationalization  and  market 
 clustering  in  an  effort  to  veil  these  swaps  in  something  posing  as  economic  logic.  Dont  buy  it.  Clever  economic  terms  cannot  mask  what  is  a  strategy  to  concentrate  ownership  and  dismantle  competition. 


 As  the  Order  itself  acknowledges,  it  is  totally  unclear  how  any  of  these  purported  efficiencies  and  market  rationalizations  will  flow  through  to  benefit  consumers.  To  the  contrary,  I  fear  consumers  will 
 end  up  finding  their  cable  bills  climbing  still  higher.  Already  cable  bills  rise  at  two  to  three  times  the  rate  of  inflation.  Since  1996,  cable  rates  have  risen  by  68  percent.  Do  we  really  believe  that  more 
 concentration  will  lead  to  a  new  era  of  lower  rates?  That  would  be  a  triumph  of  hope  over  history.  My  advice  to  consumers  when  they  hear  about  the  wonders  of  clustering  and  consolidation  is  to  hold  onto 
 your  pocketbooks.  This  is  not  a  consumer-  friendly  transaction. 
 Competition 
 I  believe  that  forfeiting  competition  is  bad  for  consumers  and  bad  for  the  future  of  our  media.  I  believe  that  ceding  gatekeeper  control  over  the  content  we  receive  in  our  homes  to  fewer  and  fewer  media 
 distributors  is  something  that  should  alarm  us.  Combining  content  and  conduit  is,  after  all,  the  classic  strategy  for  monopoly  or  control  by  a  privileged  few.  It  is  not  the  recipe  for  innovation  and  lower 
 consumer  bills.  When  more  than  30,000  individuals  and  organizations  representing  millions  of  others  called  upon  the  FCC  to  protect  their  rights  in  this  proceeding,  we  should  have  paid  heed.  At  the  end  of 
 the  day,  I  think  the  American  people  are  owed  both  a  more  rigorous  analysis  of  these  issues  and  a  better 
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 outcome  from  the  transaction  than  they  will  find  in  this  decision. 
 As  one  commenter  in  this  proceeding  put  it,  enhancing  concentration  by  clustering  markets  creates  a  fortress  that  deters  competitive  entry.  In  fact,  the  Commissions  own  precedent  bolsters  this 
 point.  The  Commission  has  found  that  cable  systems  owned  by  multiple  system  operators  that  are  part  of  a  regional  cluster  as  the  Applicants  systems  are  here  tend  to  result  in  higher  prices.  1  So  we  have  our 
 own  precedent  telling  us  that  as  a  result  of  the  swaps  and  clustering  in  this  deal,  we  will  have  less  competition  and  higher  prices.  But  the  majoritys  decision  glides  right  by  this  and  blithely  grants 
 Comcast  and  Time  Warner  license  to  cluster,  consolidate  and  non-  compete.  Though  the  items  language  is  dense  and  its  reasoning  is  long,  one  thing  is  clear:  it  is  consumers  who  are  stuck  with  the  consequences. 


 Programming  Diversity 
 Todays  decision  describes  two  types  of  programming  programming  from  networks  affiliated  with  the  Applicants  and  programming  from  independent  programmers  who  are  not  affiliated  with  the 
 Applicants. 
 Affiliated  programming  presents  special  competitive  concerns.  Both  Comcast  and  Time  Warner  have  ownership  stakes  in  popular  cable  channels.  The  Order  finds  that  if  an  incumbent  cable  provider 
 owns  must  have  content,  it  has  the  ability  and  perhaps  the  incentive  to  deny  that  content  to  satellite  companies,  other  cable  providers,  even  the  new  IPTV  networks  from  the  telephone  companies.  That 
 makes  it  difficult  for  these  entities  to  compete.  This  finding  is  correct.  The  record  shows  that  if  you  dont  have  access  to  regional  sports  games,  it  is  hard  to  compete  against  the  dominant  cable  provider.  The 
 Order  limits,  however,  the  definition  of  must  have  content  to  regional  sports  networks.  But  is  sports  programming  the  only  must  have  programming?  What  if  you  only  speak  Spanish?  Wouldnt  a  Spanish 
 language  channel  be  must  have?  How  about  local  news?  Childrens  programming?  We  ought  to  be  careful  before  starting  down  the  slippery  slope  of  determining  what  is  and  isnt  must-  have  cable 
 content.  Setting  that  aside,  the  Order  imposes  a  commercial  arbitration  remedy  to  prevent  the  price  hikes  and  competitive  foreclosure  that  result  from  denying  competitors  access  to  affiliated  regional  sports 
 networks.  Thats  good,  as  far  as  it  goes.  But  it  inexplicably  leaves  out  Philadelphia,  where  the  vertically  integrated  sports  network  is  locked  up  in  exclusive  deals  with  the  incumbent  cable  provider.  I  have  heard 
 from  a  lot  of  people  residing  in  the  City  of  Brotherly  Love  and  I  feel  confident  in  saying  they  are  not  happy  about  this  situation.  The  majority  has  now  made  some  tweaks  on  the  margins  to  guard  against 
 further  inroads  beyond  the  city,  but  the  residents  of  Philadelphia  are  still  stuck  without  competitive  choices.  You  dont  have  to  take  my  word  for  it  read  yesterdays  Philadelphia  Inquirer:  Philadelphia  is 
 Exhibit  No.  1  for  what  happens  when  a  cable  company  uses  must-  have  content  to  limit  consumers  choice.  The  story  goes  on  to  call  the  majoritys  Philadelphia  exclusion  a  lousy  argument  and  makes 
 the  point  that  Philadelphians  deserve  equal  protection  from  the  FCC.  I  agree. 
 The  availability  of  truly  independent  programming  is  another  test  of  whether  competition  exists.  Concentrating  so  much  clout  in  the  Applicants  gives  them  the  ability  to  make  or  break  cable  programming 
 across  the  country.  If  an  aspiring  cable  channel  cannot  win  carriage  on  these  big  concentrated  networks,  its  fate  is  sealed.  Its  doomed.  And  the  record  is  full  of  examples  of  channels  that  will  never  get  to  your 
 television  and  of  communities  especially  minority  communities  who  struggle  for  basic  access  to  programming  they  want  and  need.  We  need  a  system  that  works  better  for  them  and  for  all  of  us  better 
 program  carriage  rules,  a  better  complaint  process,  a  better  and  reinvigorated  leased  access  system  so  other  voices  can  be  heard.  I  note  that  a  commitment  to  review  leased  access  and  a  related  arbitration 
 condition  have  now  been  added  to  the  item  by  the  majority  and  this  is  encouraging.  I  commend 


 1  Annual  Assessment  of  the  Status  of  Competition  in  the  Markets  for  the  Delivery  of  Video  Programming,  Seventh 
 Annual  Report,  16  FCC  Rcd  6005,  6072-  73  (2001). 
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 particularly  Commissioner  Adelstein  for  his  leadership  on  this.  The  proof  of  how  well  the  Commission  lives  up  to  this  commitment  is  down  the  road,  of  course,  so  I  urge  my  leased  access  friends  in  localities 
 throughout  the  country  to  push  us  hard  to  really  deliver  on  this.  We  need  to  support  independent  programmers  and  independent  content  production.  Ill  say  it  again:  we  just  cannot  afford  to  cede  so  much 
 content  control  to  so  few  media  companies.  Its  bad  because  of  the  homogenized  entertainment  and  information  we  are  fed  and  its  bad  for  our  democracy.  And  what  happens  if  these  two  companies  refuse 
 to  take  political  advertisements  for  issues  they  oppose?  Its  like  giving  them  the  keys  to  control  what  we  watch,  see  and  hear. 


 There  is  one  aspect  of  independent  programming  where  we  make  headway  today.  The  Mid-Atlantic  Sports  Network,  an  independent  regional  sports  network,  has  been  struggling  to  get  on  the  air  in 
 the  Washington  market.  In  our  own  backyard,  subscribers  to  the  dominant  cable  provider  cant  watch  our  hometown  teams  baseball  games.  This  decision  makes  real  progress,  in  that  it  requires  Comcast  to  enter 
 into  commercial  arbitration  with  the  Mid-  Atlantic  Sports  Network  to  hammer  out  a  deal  that  can  bring  the  Washington  Nationals  to  Washingtons  homes.  I  believe  this  is  the  right  thing  to  do.  Many  Members  of 
 Congress  agree.  Let  me  note  especially  the  efforts  of  my  new  colleague,  Commissioner  McDowell.  It  is  a  good  result.  Going  forward,  this  is  only  the  tip  of  the  iceberg,  however,  for  independent  programmers. 
 While  we  solve  this  glaring  issue  for  the  Mid-  Atlantic  Sports  Network,  there  are  too  many  other  independent  programmers  stuck  without  similar  recourse. 


 Broadband  and  Net  Neutrality 
 We  all  know  the  future  of  communications  is  broadband.  I  am  worried  that  this  decision  tightens  the  grip  that  cable  companies  share  with  telephone  companies  over  our  nations  broadband  access.  FCC 
 data  show  that  these  two  industries  control  some  98  percent  of  the  broadband  market.  Despite  this,  the  majoritys  Order  goes  on  at  length  about  the  supposedly  competitive  broadband  market.  Indeed,  the 
 competitive  picture  the  majority  spins  is  at  odds  with  too  many  other  reports.  A  few  weeks  ago,  the  Congressional  Research  Service  characterized  the  broadband  market  as  a  cable  and  telephone  duopoly. 
 Just  last  week,  the  International  Telecommunications  Union  (ITU)  released  its  Digital  Opportunity  Index.  Its  a  more  nuanced  metric  than  the  broadband  penetration  statistics  the  ITU  employed  to  peg  the  United 
 States  at  16  th  in  the  world  in  broadband  penetration  this  past  year.  On  this  new  assessment  of  digital  opportunity,  your  country  and  mine  is  ranked  21  st  .  Right  after  .  .  .  Estonia.  If  we  want  to  continue  to  lay 
 claim  to  the  United  States  as  the  Land  of  Opportunity,  wed  better  find  a  way  to  make  this  country  the  Land  of  Digital  Opportunity.  Placing  more  control  in  a  handful  of  entrenched  broadband  providers  may 
 not  be  the  best  way  to  go  about  it. 
 I  also  am  disappointed  that  this  Order  gives  such  short  shrift  to  network  neutrality.  It  has  been  our  practice  to  condition  recent  mergers  of  this  scale  on  enforcement  of  the  four  principles  of  the  Internet 
 Policy  Statement  that  the  Commission  adopted  last  year.  But  here  we  backtrack  and  are  too  timid  to  even  apply  them  in  an  enforceable  fashion  to  the  transaction  at  hand.  More  than  that,  I  believe  the  Commission 
 needs  to  consider  the  addition  of  a  fifth  principle  to  its  Internet  Policy  Statement.  We  are  entering  a  world  where  big  and  concentrated  broadband  providers  are  searching  for  new  business  models  and  sometimes 
 even  suggesting  that  web  sites  may  have  to  pay  additional  charges  and  new  tolls  for  the  traffic  they  generate.  This  could  change  the  character  of  the  Internet  as  we  know  it.  To  keep  our  policies  current,  we 
 need  to  go  beyond  the  original  four  principles  and  commit  industry  and  the  FCC  to  a  specific  principle  of  enforceable  non-  discrimination,  one  that  allows  for  reasonable  network  management  but  makes  clear  that 
 broadband  network  providers  will  not  be  allowed  to  shackle  the  promise  of  the  Internet  in  its  adolescence. 
 There  are  other  concerns  I  have  with  the  majoritys  analysis.  It  dismisses  concerns  in  the  record  about  economic  redlining,  job  losses,  PEG  channel  commitments  and  key  arguments  about  loss  of 
 viewpoint  diversity  without  fully  evaluating  their  merits.  Each  of  these  is  important  in  its  own  right  and  each  merits  more  careful  handling  than  it  receives  here. 
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 In  the  end,  the  Applicants  contend  that  the  proposed  transaction  has  four  public  interest  benefits:  a  pledge  to  roll  out  new  video  services,  efficiencies  from  geographic  rationalization,  resolution  of  the 
 bankruptcy  and  unwinding  Comcasts  interests  in  a  limited  partnership  acquired  in  an  earlier  transaction.  But  even  the  Commission  finds  two  of  those  four  claimed  benefits  non-  compelling.  That  leaves  two 
 assertions  on  which  the  majority  rests  its  case.  One  is  the  promise  to  deploy  new  video  services,  but  this  is  tempered  by  the  majoritys  doubt  that  triple  play  broadband  will  be  much  enhanced  by  the  transaction. 
 Second  is  resolution  of  the  bankruptcy,  but  no  mention  is  made  that  other  and  less  anti-  competitive  options  could  have  accomplished  a  similar  end.  That  doesnt  leave  much  of  a  case  to  justify  this  kind  of 
 potential  market  disruption  and  additional  industry  consolidation. 
 Just  a  few  weeks  ago,  the  Commission  voted  to  revisit  its  broadcast  ownership  rules.  I  argued  then  for  an  open  and  transparent  process  and  for  doing  independent  and  granular  studies  so  as  to 
 understand  what  is  happening  in  various  media  markets  before  we  vote  again  to  change  the  limits.  I  hope  we  will  do  just  that.  Its  what  we  should  be  doing  here,  too.  But  todays  action  doesnt  encourage  me. 
 We  have  cable  ownership  limits  that  were  returned  to  the  Commission  years  ago  for  study  and  reworking  and  they  continue  to  languish  with  no  action.  Instead  we  plunge  ahead  to  approve  a  huge  transaction 
 without  the  factual  foundation  we  should  have  before  changing  the  media  environment  so  profoundly. 
 As  I  have  said  before,  mergers  and  acquisitions  are  not  inherently  bad.  In  the  past  I  have  supported  mergers  when  the  benefits  truly  outweigh  the  harms.  As  I  mentioned  upfront,  there  are  some 
 positives  to  be  found  in  the  revival  and  improvement  of  Adelphias  systems.  But  they  cannot  and  do  not  overcome  the  broader  negatives  and  consumer  costs  inherent  in  this  mega-  transaction.  Because  of  the 
 potential  for  harm  and  what  I  believe  are  inevitable  higher  costs  for  consumers,  I  do  not  join  my  colleagues  in  supporting  this  decision  and  will  dissent  from  it. 
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 STATEMENT  OF  COMMISSIONER  JONATHAN  S.  ADELSTEIN, 
 APPROVING  IN  PART  &  DISSENTING  IN  PART 
 Re:  Applications  for  Consent  to  the  Assignment  and/  or  Transfer  of  Control  of  Licenses;  Adelphia  Communications  Corporation  (and  subsidiaries,  debtors-  in-  possession),  Assignors,  to  Time  Warner 
 Cable  Inc.  (subsidiaries),  Assignees;  Adelphia  Communications  Corporation  (and  subsidiaries,  debtors-in-  possession),  Assignors  and  Transferors,  to  Comcast  Corporation  (subsidiaries),  Assignees  and 
 Transferees;  Comcast  Corporation,  Transferor,  to  Time  Warner  Inc.,  Transferee;  Time  Warner  Inc.,  Transferor  to  Comcast  Corporation,  Transferee,  Memorandum  Opinion  and  Order  (MB  Docket  No.  05- 
 192). 
 After  more  than  a  year,  this  Commission  has  finally  completed  its  public  interest  review  of  the  acquisition  by  Comcast  Corporation  (  Comcast)  and  Time  Warner  Cable  Inc.  (  TWC)  of  the  cable 
 systems  and  assets  of  Adelphia  Communications  Corporation  (  Adelphia),  and  related  transactions  in  which  Comcast  and  TWC  will  exchange  various  cable  systems  and  assets,  and  expedite  the  redemption 
 of  Comcasts  interests  in  TWC  and  Time  Warner  Entertainment  Company  (  TWE). 
 At  the  outset,  I  must  say  that  I  share  many  of  the  concerns  raised  by  opponents  of  this  merger,  and  I  might  have  preferred  that  Adelphia  remain  an  independent  entity,  or  that  it  be  purchased  by 
 companies  without  the  enormous  market  power  that  the  Applicants  have  in  some  of  Adelphias  service  areas.  Ultimately,  though,  the  question  is  whether  it  is  better  for  consumers  for  Adelphia  to  remain  in 
 bankruptcy,  or  for  this  transaction  to  proceed,  with  appropriate  conditions. 
 We  do  not  choose  the  mergers  that  come  before  us.  Faced  with  this  merger,  we  must  analyze  the  record  evidence  and  determine  whether  the  public  will  be  served  better  by  the  transaction  being  approved 
 or  being  denied,  and  what  conditions  may  be  necessary  to  mitigate  harms  to  consumers.  While  I  continue  to  have  some  concerns,  I  believe  this  acquisition,  with  the  conditions  we  adopt  in  this  Order,  generates 
 several  ancillary  benefits  that,  on  balance,  satisfy  the  Commissions  statutory  obligations  to  protect  consumers.  Because  of  the  willingness  of  my  colleagues  to  consider  critical  consumer  protections  that 
 significantly  mitigate  some  of  the  potential  harms,  I  believe  consumers  will  be  better  served  by  this  transaction  proceeding  rather  than  allowing  Adelphia  to  remain  in  bankruptcy  while  its  customers  watch 
 their  service  continue  to  deteriorate. 
 Notably,  in  seeking  approval  for  this  transaction,  Comcast  and  TWC  have  pledged  to  invest  over  $1.6  billion  to  upgrade  Adelphias  network,  which  should  bring  improved  broadband  service,  access  to 
 voice  over  Internet  protocol  telephone  service,  video  on  demand  and  other  innovations  that  are  currently  enjoyed  by  many  customers  of  other  cable  and  telephone  companies.  Most  importantly,  my  support  for 
 this  item  is  based  on  critical  conditions  that  were  included  in  our  negotiations  to  protect  sports  fans  ability  to  get  video  access  to  their  home  teams,  to  promote  the  diversity  of  independent  programming 
 available  to  cable  customers,  and  to  ensure  the  video  marketplace  remains  competitive. 
 The  underlying  fact  of  this  acquisition  is  that  Comcast  and  TWC  are  buying  a  bankrupt  cable  company,  Adelphia,  whose  five  million  subscribers  and  cable  systems  in  31  states  are  suffering  from  a 
 severe  lack  of  investment  and  a  resulting  deterioration  of  service  in  the  course  of  a  protracted  bankruptcy  and  regulatory  process.  Adelphia,  the  nations  fifth  largest  cable  operator,  is  essentially  rotting  on  the 
 vine  awaiting  the  completion  of  this  transaction,  and  as  a  result,  its  consumers  are  being  further  victimized  by  the  fraud  perpetrated  by  Adelphias  former  executives. 


 This  transaction  has  the  benefit  of  facilitating  the  successful  resolution  of  the  Adelphia  bankruptcy  proceeding.  It  also  has  the  added  benefit  of  unwinding  Comcasts  interests  in  TWC  and 
 TWE.  Although  Comcast  and  TWC  have  a  preexisting  obligation  to  unwind  Comcasts  interests,  their  continued  financial  entanglement  has  long  been  a  significant  concern  to  this  Commission  and  many  of  us 
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 who  are  worried  about  the  implications  of  those  ties  for  media  consolidation. 
 In  the  final  analysis,  both  Comcast  and  TWC  will  remain  below  the  Commissions  defacto  thirty-percent  cable  ownership  limits  2  post-  transaction.  Nevertheless,  while  there  are  meritorious  reasons  to 
 support  the  instant  acquisition,  there  are  potential  public  interest  harms  that  compelled  the  adoption  of  essential  program  access  and  program  carriage  conditions  to  preserve  and  enhance  a  competitive  video 
 market. 
 Based  on  my  review  of  the  record,  there  is  a  reasonable  likelihood  that  this  transaction  could  increase  the  incentive  for  Comcast  or  TWC  to  foreclose  or  engage  in  other  anticompetitive  practices 
 against  independent,  unaffiliated  programmers.  Congress  specifically  authorized  commercial  leased  access  for  unaffiliated  programmers  to  gain  reasonable  access  to  cable  systems,  and  empowered  the 
 Commission  to  create  a  pricing  regime  and  complaint  process.  Unfortunately,  while  it  was  widely  recognized  that  cable  operators  had  the  incentive  and  ability  to  prefer  their  own  programming,  or  the 
 programming  of  another  operator,  rather  than  an  independent  programmer,  the  Commissions  pricing  regime  and  complaint  process  have  not  facilitated  the  use  of  leased  access. 


 I  am  pleased  that  my  colleagues  are  sensitive  to  this  problem  and  to  the  potentially  increased  harm  this  transaction  would  have  on  small,  independent,  unaffiliated  programmers.  Accordingly,  this 
 Order  provides  aggrieved  independent  programmers  with  the  option  to  seek  arbitration  in  the  event  there  is  a  dispute  with  the  cable  operator  over  the  terms  and  conditions. 


 Also,  because  the  Commissions  price  formula  currently  allows  cable  operators  to  gain  full  compensation  for  all  potential  costs  or  risks  that  leased  access  might  impose  on  cable  subscribers,  cable 
 operators  may  not  be  offering  independent  programmers  a  reasonable,  justifiable  rate  to  provide  access.  I  am  especially  pleased  that  the  Chairman  and  my  colleagues  agreed  to  launch  an  NPRM  within  three 
 months  on  the  broader  issue  of  leased  access  that  will  address  these  concerns  about  pricing  and  other  issues.  This,  combined  with  the  condition  on  the  merger,  presents  a  real  opportunity  to  revitalize  a 
 moribund  program,  so  that  it  can  reach  the  potential  Congress  envisioned  in  promoting  diversity  of  programming  available  to  cable  consumers.  I  especially  want  to  thank  Chairman  Martin  for  agreeing  with 
 me  to  move  that  NPRM  to  a  final  order  in  a  reasonable  period  of  time.  I  would  also  thank  Harold  Feld  and  the  Media  Access  Project  for  their  leadership  in  bringing  this  to  the  attention  of  the  Commission,  and 
 for  making  a  real  difference  in  the  final  product. 
 In  addressing  another  concern,  Commission  analysis  determined  that  increased  geographic  clustering  resulting  from  this  acquisition  would  indeed  make  it  more  likely  for  Comcast  or  TWC  to 
 engage  in  certain  anticompetitive  practices.  This  could  effectively  foreclose  overbuilders,  satellite  and  telephone  distribution  competitors  from  gaining  access  to  must  have  regional  sports  programming 
 owned  or  controlled,  in  whole  or  in  part,  by  Comcast  and  TWC.  3  While  the  parties  argued  that  geographic  clustering  generates  certain  economies  of  scale  and  efficiency,  there  is  a  real  opportunity  for 
 abuse  here,  as  well.  The  Order  acknowledges  that  consumers  will  gain  little  measurable  benefit  from 


 2  I  strongly  support  prompt  resolution  of  the  Commissions  cable  horizontal  and  vertical  ownership  rules  that  were 
 reversed  and  remanded  by  the  U.  S.  Court  of  Appeals  for  the  District  of  Columbia  in  2001.  Time  Warner  Entertainment  Co.  v.  U.  S.,  240  F.  3d  1126  (D.  C.  Cir.  2001).  As  a  result  of  this  transaction  Comcasts  national 


 subscribership  jumps  .7  percent,  from  28.2  percent  to  of  28.  9  percent    a  mere  1.1  percent  below  our  30  percent  ownership  limit.  TWCs  national  subscribership  will  be  nearly  18  percent. 


 3  As  a  result  of  this  transaction,  Comcast  will  have  more  consolidated  cable  operations  in  Southern  Florida, 
 Minnesota,  New  England  area,  Boston,  Pennsylvania,  Washington,  D.  C.,  Maryland  and  Virginia.  TWC  will  have  more  consolidated  cable  operations  in  California,  Maine,  Western  New  York,  North  Carolina,  South  Carolina,  Ohio 


 and  Texas. 
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 clustering.  I  share  Commissioner  Copps  concern  about  the  potential  abuse  of  market  power  such  concentration  may  permit  in  local  markets  where  clustering  is  occurring. 
 In  analyzing  the  likely  impact  of  this  transaction  on  the  relevant  video  distribution  and  programming  markets,  the  Commission  found  that  Comcast  and  TWC  would  have  the  increased  incentive 
 and  ability  to  adopt  certain  stealth  discriminatory  practices,  such  as  uniform  overcharge  pricing.  As  a  result,  in  this  Order,  the  Commission  prohibits  Comcast  and  TWC  from  either  offering  their  affiliated 
 RSNs  to  a  video  distributor  on  an  exclusive  basis  or  entering  into  any  exclusive  distribution  arrangement  with  their  affiliated  RSNs,  notwithstanding  the  terrestrial  exemption  to  the  program  access  rules. 
 Additionally,  we  also  provide  aggrieved  video  distributors  with  the  option  to  seek  binding  commercial  arbitration  to  settle  disputes  concerning  terms  and  conditions. 


 I  am  pleased  that  my  colleagues  agreed  to  grandfather  cable  operators  that  currently  have  access  to  Philadelphia  Sports  Net,  in  order  to  refrain  from  disenfranchising  hundreds  of  thousands  of 
 Philadelphia  sports  fans.  As  a  result,  customers  of  competitive  cable  operators  in  the  Philadelphia  market  will  not  have  to  worry  about  being  cut  off  from  watching  their  favorite  sports  teams.  Now  these 
 Philadelphia-  area  cable  operators,  similar  to  other  operators  seeking  access  to  affiliated  RSN  programming  across  the  country,  will  have  the  opportunity  to  request  arbitration  to  determine  the  terms 
 and  conditions  of  future  contracts. 
 At  my  urging,  the  Commission  also  agreed  to  impose  the  program  access  and  arbitration  conditions  to  all  affiliated  RSNs  in  which  Comcast  or  TWC  have  management  control  or  an  option  to 
 purchase  an  attributable  interest.  This  extension  should  capture  RSNs  in  which  Comcast  or  TWC  do  not  have  an  ownership  interests,  but  have  a  relationship  that  effectively  operates  like  one. 


 I  am  concerned,  though,  that  we  do  not  address  in  the  item  those  financial  relationships  that  significantly  lower  the  net  effective  rate  that  applicants  pay  for  the  RSN  programming.  Using 
 arrangement  like  marketing  or  sales  agreements,  competitors  have  alleged  that  the  applicants  can  artificially  raise  the  rate  that  competitors  must  pay  for  RSN  programming,  while  insulating  themselves 
 from  the  full  impact  of  the  rates  by  cross-  subsidizing  it  with  other  backroom  deals.  The  Commission  should  remain  vigilant  about  such  arrangements  and  explore  it  through  the  rulemaking  process.  In  that 
 regard,  I  thank  the  Chairman  for  his  commitment  to  launch  an  NPRM  regarding  our  cable  ownership  attribution  rules  that  will  include  questions  about  this  practice. 


 I  dissent  in  part  from  this  Order  because  I  am  particularly  concerned  that  the  Commission  fails  to  adopt  explicit,  enforceable  provisions  to  preserve  and  promote  the  open  and  interconnected  nature  of  the 
 Internet.  The  Internet  has  been  a  source  of  remarkable  innovation  and  has  opened  a  new  world  of  social  and  economic  opportunities.  One  reason  that  it  is  such  a  transformative  tool  is  its  openness  and  diversity. 
 To  help  preserve  this  character,  the  FCC  last  fall  adopted  an  Internet  Policy  Statement  that  sets  out  a  basic  set  of  consumer  expectations  for  broadband  providers  and  the  Internet.  With  these  four  principles,  we 
 sought  to  ensure  that  consumers  are  entitled  to  access  the  lawful  Internet  content  of  their  choice,  to  run  applications  and  use  services  of  their  choice,  subject  to  the  needs  of  law  enforcement,  and  to  connect  their 
 choice  of  legal  devices  that  do  not  harm  the  network.  I  am  deeply  concerned  that  the  majority  does  not  require  the  applicants  to  meet  these  basic  provisions  adopted  unanimously  by  the  Commission  and 
 applied  as  enforceable  conditions  to  the  mergers  of  our  nations  largest  telephone  companies,  less  than  a  year  ago. 


 It  is  a  major  step  back  to  let  these  large  media  conglomerates,  including  two  of  the  nations  largest  broadband  providers,  grow  even  bigger  without  requiring  that  they  comply  with  basic  network 
 neutrality  principles.  The  majoritys  decision  to  backtrack  from  earlier  Commission  precedent  is  particularly  troubling  given  that  we  should  be  thinking  about  how  to  enhance  our  consumer  protections  in 
 the  broadband  world,  not  to  erode  them.  We  continue  to  see  a  broadband  market  in  which,  according  to  FCC  statistics,  telephone  and  cable  operators  control  nearly  98  percent  of  the  market,  with  many 
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 consumers  lacking  any  meaningful  choice  of  providers.  Given  the  increase  in  concentration  and  the  significant  combinations  of  content  and  services  presented  in  this  transaction,  this  Commission  should 
 even  be  looking  to  add  a  principle  to  address  incentives  for  anti-  competitive  discrimination,  in  addition  to  imposing  those  principles  the  Commission  already  has  unanimously  approved.  Without  even  the  bare 
 minimum  of  enforceable  provisions  to  address  these  issues  in  the  context  of  this  merger,  I  must  dissent  in  part. 


 I  am  also  pleased  that  my  colleagues  made  efforts  to  address  concerns  about  sports  and  childrens  programming  that  deserved  attention.  I  commend  Commissioner  McDowell  for  his  leadership  in 
 ensuring  fair  treatment  for  the  Mid-  Atlantic  Sports  Network  in  its  carriage  dispute  with  Comcast,  and  Commissioner  Tate  for  her  efforts  to  help  resolve  concerns  about  the  provisioning  of  PBS  Sprout  to  a 
 competing  cable  provider. 
 I  want  to  thank  my  colleagues  for  their  willingness  to  consider  so  many  of  my  concerns  and  adopt  meaningful  conditions  to  address  potential  anti-  competitive  harms  to  consumers.  Their  cooperation 
 enabled  me  to  support  in  part  this  item. 
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 STATEMENT  OF  COMMISSIONER  DEBORAH  TAYLOR  TATE 
 Re:  Applications  for  Consent  to  the  Assignment  and/  or  Transfer  of  Control  of  Licenses;  Adelphia  Communications  Corporation  (and  subsidiaries,  debtors-  in-  possession),  Assignors,  to  Time  Warner 
 Cable  Inc.  (subsidiaries),  Assignees;  Adelphia  Communications  Corporation  (and  subsidiaries,  debtors-in-  possession),  Assignors  and  Transferors,  to  Comcast  Corporation  (subsidiaries),  Assignees  and 
 Transferees;  Comcast  Corporation,  Transferor,  to  Time  Warner  Inc.,  Transferee;  Time  Warner  Inc.,  Transferor  to  Comcast  Corporation,  Transferee,  Memorandum  Opinion  and  Order  (MB  Docket  No.  05- 
 192). 
 The  Communications  Act  requires  the  parties  in  these  applications  to  demonstrate  that  allowing  this  transaction  to  go  forward  will  serve  the  public  interest,  convenience,  and  necessity.  I  have  carefully 
 reviewed  the  thoughtful  comments  provided  by  numerous  parties    from  the  America  Channel  to  the  Urban  League  of  Greater  Hartford  and  everyone  in  between.  Based  on  this  review,  I  have  concluded  that 
 the  applicants  have  met  the  standards  dictated  by  the  statute,  and  I  therefore  support  this  Order. 
 In  proceedings  such  as  this,  the  burden  is  on  the  Applicants  to  show  by  a  preponderance  of  the  evidence  that  the  proposed  transactions  would  benefit  the  public  interest  more  than  it  would  harm  it.  The 
 Commissions  review  is  limited  to  the  transaction  presented,  and  it  should  not  attempt  to  use  this  Order  to  conduct  an  industry-  wide  rulemaking.  Accordingly,  the  conditions  that  we  impose  today  are  limited  to 
 merger-  specific  issues  that  remedy  identified  harms  that  might  otherwise  occur.  That  said,  many  of  the  concerns  raised  in  the  comments  implicate  serious  questions  about  the  underlying  cable  ownership  rules 
 that  I  hope  we  can  address  on  an  industry-  wide  basis  in  other  proceedings  pending  at  the  Commission  in  the  near  future. 


 With  regard  to  this  item,  I  have  met  with  the  Applicants  and  received  numerous  assurances  about  how  they  will  behave  following  the  completion  of  the  proposed  transaction.  Let  me  respond  to  those 
 assurances  with  one  of  my  own:  I  intend  to  see  that  promises  made  are  promises  kept. 
 The  FCC    following  the  lead  of  the  President  of  the  United  States    has  made  deployment  of  broadband  to  all  Americans  a  top  priority.  This  deployment  is  critical  to  our  nations  competitiveness  in 
 the  global  economy  and  to  our  national  security.  It  implicates  every  aspect  of  our  lives    from  health  to  education  to  public  safety.  All  consumers  should  expect  to  benefit  from  this  technology.  I  have  been 
 repeatedly  assured  that  broadband  and  other  services  will  be  deployed  on  a  fair,  equitable,  and  expedited  basis  to  the  areas  served  by  these  companies.  Given  the  importance  of  this  deployment,  let  me  make  it 
 absolutely  clear  that  so-  called  redlining    the  distribution  of  services  based  solely  on  the  ethnicity  or  income  level  of  an  area    will  not  be  tolerated.  Period. 


 I  am  also  troubled  by  the  continued  reports  of  the  difficulty  that  smaller,  independent  channels  have  in  getting  carriage  on  cable  systems.  The  names  Comcast  and  Time  Warner  frequently  are  invoked 
 by  these  smaller  programmers  as    and  Ill  put  it  diplomatically  here    being  difficult  to  work  with  on  this  issue.  It  is  in  the  public  interest  to  have  a  diversity  of  voices  on  the  air.  When  the  America  Channel  is 
 seen  by  more  people  outside  the  United  States  than  in  it,  when  Hispanic-  focused  channels  have  trouble  getting  carriage  in  Los  Angeles  and  other  large  Hispanic  markets    when  I  hear  these  and  other  similar 
 reports  I  am  far  from  convinced  that  cable  providers  are  doing  an  adequate  job  in  promoting  a  diversity  of  voices  on  television. 


 Nonetheless,  I  am  not  willing  to  combat  allegations  of  unfairness  with  an  unfair  act  of  our  own.  Addressing  industry-  wide  problems  on  a  case-  by-  case  basis  only  undermines  the  development  of  a  truly 
 competitive  marketplace,  and  such  onerous  conditions  have  no  place  in  an  Order  by  a  Commission  committed  to  helping  American  businesses  stay  ahead  in  an  increasingly  competitive  world.  The 
 Commission  once  again  takes  steps  in  line  with  my  own  philosophy  of  regulatory  humility  and  resists  the 
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 and  inspire  the  American  people  through  the  power  of  media.  Yes,  I  would  like  to  see  them  do  more,  and  I  have  and  will  continue  to  say  so.  But  by  expressing  that  desire,  I  do  not  in  any  way  mean  to  suggest  that 
 they  do  not  deserve  credit  for  all  that  they  have  already  accomplished. 
 I  thank  the  Chairman,  my  fellow  Commissioners,  and  the  dedicated  FCC  staff  for  their  hard  work  on  this  item.  I  particularly  want  to  thank  all  those  who  filed  thoughtful  comments  and  excellent  legal 
 analysis  which  contributed  to  this  important  debate.  I  look  forward  to  a  continuing  dialog  with  all  parties  in  the  coming  months. 
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 STATEMENT  OF  COMMISSIONER  ROBERT  M.  MCDOWELL 
 Re:  Applications  for  Consent  to  the  Assignment  and/  or  Transfer  of  Control  of  Licenses;  Adelphia  Communications  Corporation  (and  subsidiaries,  debtors-  in-  possession),  Assignors,  to  Time  Warner 
 Cable  Inc.  (subsidiaries),  Assignees;  Adelphia  Communications  Corporation  (and  subsidiaries,  debtors-in-  possession),  Assignors  and  Transferors,  to  Comcast  Corporation  (subsidiaries),  Assignees  and 
 Transferees;  Comcast  Corporation,  Transferor,  to  Time  Warner  Inc.,  Transferee;  Time  Warner  Inc.,  Transferor  to  Comcast  Corporation,  Transferee,  Memorandum  Opinion  and  Order  (MB  Docket  No.  05- 
 192). 
 I  support  the  Commissions  decision  to  approve  this  transaction.  Clearly,  the  merger  will  benefit  consumers,  particularly  those  who  continue  to  be  served  by  Adelphia  during  its  lengthy  bankruptcy 
 proceeding,  by  creating  synergies  that  will  spur  investment,  create  efficiencies  and  speed  the  roll-  out  of  competitive  new  technologies. 


 However,  it  has  become  clear  to  me  through  this  merger  review  process  that  the  Commissions  regulations  governing  program  carriage  agreements  and  program  access  by  MVPDs  for  years  have  not 
 been  enforced  in  the  expeditious  manner  contemplated  by  Congress  and  our  own  rules.  Although  the  substance  of  these  regulations  provides  MVPDs  and  programmers  with  standards  and  processes  for 
 redress  of  their  program  access  and  program  carriage  disputes  with  cable  providers,  very  few  parties  have  filed  complaints  to  adjudicate  their  disputes.  Those  that  are  filed  often  wait  too  long  for  resolution.  In 
 fact,  it  seems  that  many  disputes  are  never  resolved.  Why?  Because  the  FCC  has  not  been  doing  its  job.  The  parties  to  these  complaints  deserve  better  treatment  from  this  Commission.  More  importantly,  so  do 
 consumers.  Competition,  in  this  quickly  evolving  market,  should  not  be  held  back  by  an  indolent  bureaucracys  failure  to  obey  simple  Congressional  mandates.  Speedy  resolution  of  disputes  is  critical, 
 especially  where  regional  sports  networks  are  concerned.  When  a  programmer  or  an  MVPD  is  unable  to  air  games  at  the  start  of  a  season,  the  competitive  damage  to  its  business  has  already  been  done.  The 
 FCCs  inaction  should  not  be  responsible  for  such  a  delay.  Accordingly,  I  strongly  support  the  commitment  by  the  Commission  to  review  and  reform  the  procedures  for  enforcement  of  its  program 
 access  and  program  carriage  rules.  And  I  applaud  the  commitment  to  do  so  in  short  order. 
 In  the  meantime,  part  of  what  the  Commission  is  doing  today  is  to  pave  a  path  toward  a  private  sector  solution  to  resolve  program  access  disputes.  Of  course,  our  preference  is  that  conflicts  be  resolved 
 and  deals  be  made  without  parties  having  to  resort  to  litigation  or  arbitration.  This  Order  provides  incentives  for  such  resolutions.  However,  should  parties  refuse  to  negotiate  or  fail  to  agree,  we  are  paving 
 a  path  toward  private  sector  binding  arbitration,  with  the  ultimate  destination  being  final  resolution.  With  a  two-  step  analysis  commencing  with  a  determination  of  whether  carriage  should  be  required  at  all, 
 followed  by  baseball-  style  arbitration  to  determine  rates,  terms  and  conditions,  no  particular  outcome  is  guaranteed.  Furthermore,  no  new  legal  standards  are  being  created.  However,  to  ensure  speedy 
 resolution,  we  are  imposing  a  shot  clock  on  all  proceedings,  including  any  relevant  Commission  review  of  arbitration  decisions.  Again,  arbitration  can  be  avoided  if  parties  make  deals.  But,  should  arbitration 
 be  necessary,  it  will  be  concluded  swiftly  and  at  minimal  cost.  This  dispute  resolution  framework  is  used  successfully  thousands  of  times  per  day  throughout  the  country  in  the  private  sector,  and  we  are  confident 
 that  it  will  be  just  as  successful  in  this  context  as  well.  We  believe  all  parties  will  benefit,  especially  the  American  consumer. 


 For  similar  reasons,  I  also  wholeheartedly  support  binding  arbitration  of  the  dispute  between  the  Mid-  Atlantic  Sports  Network  and  Comcast  over  carriage  of  the  Washington  Nationals  games.  Protracted 
 negotiations  and  legal  wrangling  between  the  parties  somehow  have  failed  to  produce  televised  coverage  of  75  percent  of  this  seasons  games  for  the  1.3  million  Comcast  subscribers  in  the  Washington  D.  C. 
 market.  And,  apparently,  the  MASN  complaint  has  been  left  to  rot  in  some  lost  crypt  inside  this  building.  Accordingly,  the  narrow  arbitration  remedy  in  the  Order  creates  a  private-  sector  solution  to  the  dispute. 
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 This  remedy  also  does  not  dictate  a  particular  outcome,  nor  does  it  create  a  new  legal  standard  for  reviewing  program  carriage  issues.  It  does,  however,  provide  for  a  timely  and  long-  overdue  decision  that 
 will  break  the  long-  standing  impasse  between  MASN  and  Comcast.  One  way  or  the  other,  a  decision  will  be  made.  Of  course,  the  parties  are  free  to  resolve  the  dispute  beforehand,  at  any  time. 


 I  would  like  to  thank  my  fellow  Commissioners  for  their  hard  work  on  this  important  matter.  The  lights  have  been  burning  late  here  at  the  FCC  recently.  Many  thanks  to  Commissioner  Tate  for  her 
 insight    especially  regarding  childrens  programming.  Thank  you,  Commissioner  Adelstein,  for  your  efforts  regarding  program  access  and  carriage.  Commissioner  Copps,  many  thanks  for  initiating  the 
 conversation  on  net  neutrality.  I  appreciate  your  thoughtfulness  and  look  forward  to  additional  dialogue.  And  lastly,  Mr.  Chairman,  thank  you  for  your  leadership,  especially  working  so  hard  into  the  wee  hours. 


 I  thank  Donna  Gregg  and  the  Media  Bureau  staff  for  their  dedication  and  hard  work  on  this  item.  I  look  forward  to  our  review  and  reform  of  our  rules. 
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