Document:

EX-10.42 AMENDED EMPLOYMENT AGRMT/M.L.A.

 

Exhibit 10.42

TIME WARNER CABLE LETTERHEAD

Confidential

November 10, 2005

Marc Lawrence-Apfelbaum

Time Warner Cable

290 Harbor Drive

Stamford, CT 06902

Dear Marc:

In accordance with the provisions of Section 1 of the Amended and Restated Employment and
Termination Agreement (the “Agreement”) dated as of June 1, 2000, between you and Time Warner Cable
(the “Company”), notice is hereby given to you of the Company’s determination to extend the term of
the Agreement for an additional year.

Please indicate your acceptance of the foregoing extension of the Agreement by signing the enclosed
copy of this letter and returning it to the Company by December 15th. Pursuant to Section 1 of the
Agreement, failure to do so will be deemed an election by you to terminate your employment without
cause pursuant to Section 5(a) of the Agreement.

Very truly yours,

TIME WARNER ENTERTAINMENT COMPANY, L.P., a

subsidiary of TIME WARNER CABLE INC.

	 	 	 	 	 
	By: 

	/s/ Robert Marcus	 	 
	 

	 

Robert Marcus
	 	 
	 

	Senior Executive Vice President	 	 
	 
	 	 	 	 
	Accepted:	 	 
	 
	 	 	 	 
	/s/ Marc Lawrence-Apfelbaum	 	 
	 	 	 
	Signature	 	 
	 
	 	 	 	 
	11.17.05	 	 
	Date
	 	 

 

 

     Amended and Restated Employment and Termination Agreement dated as of June 1, 2000, between
Time Warner Cable, a division of Time Warner Entertainment Company, L.P., a Delaware limited
partnership (the “Company”), and the employee whose name appears on the last page hereof (the
“Employee”). Employee and the Company (or its predecessor) previously entered into the original
Employment and Termination Agreement dated as of June 29, 1989 (as amended from time to time, the
“Original Agreement”).

     The Company and Employee hereby agree to amend and restate the Original Agreement in its
entirety, and to continue Employee’s employment with the Company, on the following terms and
conditions:

     1. Term. The Company hereby employs Employee and Employee hereby accepts such
employment upon the terms and conditions hereof for a term commencing on the date of this Agreement
as set forth above and, subject to the following sentences of this Section, ending on December 31,
2002. Unless Employee’s employment under this Agreement is otherwise terminated in accordance with
Sections 5, 6 or 7, during the period between November 1st to November 30th of 2000 and each year
thereafter, the Company shall notify Employee in writing (using the form attached hereto as Exhibit
A) of its determination either to extend the term of this Agreement on the same terms and
conditions for an additional year, or to terminate Employee’s employment under this Agreement in
accordance with Section 6(b), effective as provided in such notice. If the Company shall so notify
Employee of its determination to extend the term of this Agreement and Employee accepts such
extension in writing prior to December 20th of such year, then, unless Employee’s employment under
this Agreement is otherwise so terminated, this Agreement shall as of the January 1st immediately
thereafter have a remaining unexpired term of

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three calendar years. If Employee fails to accept (using such form) any such extension in
writing prior to any such December 20th, Employee shall be deemed to have given written notice of
termination without cause as provided in Section 5(a); such termination shall be effective 90 days
after such December 20th and the provisions of Section 5(a) shall govern as to the terms of such
termination. Except as provided in this Section 1 and Sections 5, 6 or 7, Employee’s employment
under this Agreement may not be terminated. Sections 8 through 23 and 25 through 32 shall survive
any termination of Employee’s employment under this Agreement.

     2. Duties. Employee shall serve in his or her current management position with the
title indicated on the last page hereof or, subject to Section 5, in such other senior management
position as the Company shall determine. Subject to the foregoing, Employee shall perform such
duties as may be assigned by the Company to Employee from time to time, and shall travel for
business purposes to the extent reasonably necessary or appropriate in the performance of such
duties.

     Employee shall perform such duties on a full time basis (subject to the Company’s written
policies on vacations, illness, government service, sabbaticals, etc. applicable to employees at
Employee’s level); provided, however, that Employee shall not be precluded from
devoting such time to personal affairs as shall not interfere with the performance of his or her
duties hereunder. In performing his or her duties hereunder, Employee shall comply with the
Company’s and Time Warner Inc.’s (“TWI”) written policies on conflict of interest, service as a
director of another company and other policies and procedures of the Company and TWI, including as
described in TWI’s Statement of Corporate Policy and Compliance Program Manual, as may be amended
or revised from time to time, copies of which, as currently in effect, Employee acknowledges having
received. References in this Agreement to employees at

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Employee’s level shall mean members of the Executive Group (defined as individuals with an
assigned executive compensation level with eligibility for the Long Term Cash Plan and Tier I Level
Stock Options, or such other substitute plans as the Company may designate from time to time).

     3. Compensation. The Company shall pay Employee an annual salary in respect of each
calendar year of not less than the amount set forth on the last page hereof and an annual bonus in
respect of each calendar year based on a target percentage of the annual salary paid to Employee
during such calendar year of not less than the percentage set forth on the last page hereof.
Subject to Section 5, Employee acknowledges that his or her actual annual bonus (the “Annual
Bonus”) may vary, depending on actual performance of the Company and Employee; provided,
however, that Employee shall be entitled to a minimum Annual Bonus in respect of each
calendar year equal to one-half of the bonus calculated based on such target percentage (the
“Target Bonus”) for such calendar year. Employee shall also be eligible to participate in any stock
bonus, stock option, restricted stock, long-term incentive, deferred compensation or other
executive compensation plan, whether now existing or established hereafter, to the extent employees
at Employee’s level are generally deemed eligible to participate therein (collectively, the
“Incentive Plans”).

     The Company shall evaluate the performance of Employee at least annually in accordance with
the Company’s personnel evaluation practices, as may be in effect from time to time, and shall
determine, in its sole discretion, but subject to Section 5 and the second sentence of this Section
3, the amount of any annual salary increase, the amount of any Annual Bonus, whether to increase
the target percentage of Employee’s Annual Bonus, and the extent of Employee’s participation, if
any, in the Incentive Plans.

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     The Company shall pay or reimburse Employee, in accordance with Company policies applicable to
employees at Employee’s level, for all travel, entertainment and other business expenses actually
incurred or paid by Employee (while an active employee) in the performance of his or her duties
hereunder, if properly substantiated and submitted.

     4. Benefits. Employee shall be eligible to participate in any pension,
profit-sharing, employee stock ownership, deferred compensation, vacation, insurance,
hospitalization, medical, health, disability and other employee benefit or welfare plan, program or
policy whether now existing or established hereafter (collectively, the “Benefit Plans”), to the
extent that employees at Employee’s level are generally deemed eligible under the general
provisions thereof.

     5. Termination By Employee.

          (a) General. Except as provided in Sections 1 or 5(b) or by reason of Employee’s
retirement under the terms of Section 5(c) or of any retirement plan in which employees of the
Company are generally eligible to participate, Employee may not terminate his or her employment
under this Agreement except upon 90 days prior written notice and only if notice of termination has
not previously been given under any other Section hereof. Upon the effectiveness of such
termination, Employee’s employment with the Company will terminate and Employee shall be entitled
to receive (i) any earned and unpaid portion of annual salary accrued through the date of such
termination, and (ii) subject to the terms thereof, all benefits which may be due to Employee under
the provisions of any Benefit Plan and Incentive Plan. Employee hereby disclaims any right to
receive a pro rata portion of his or her Annual Bonus with respect to the year in which such
termination occurs.

          (b) Following a Change in Control.

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               (i) Provided that notice of termination has not previously been given under any other Section
hereof, Employee shall have the right to terminate his or her employment with the Company under
this Agreement for cause upon 30 days prior written notice delivered to the Company at any time
within 180 days after Employee has actual knowledge of the occurrence of any of the following
events, but only if any such event occurs within three years following a Change in Control,
indicating in such notice which event has occurred:

                    A. A change in the location of Employee’s office or (if the Employee’s work is located at the
Company’s principal executive offices) of the Company’s principal executive offices, to a place
which is more than 50 miles from the location of Employee’s office or the location of the Company’s
principal executive offices, immediately prior to the occurrence of a Change in Control;

                    B. A material reduction in Employee’s decision-making, budgetary, operating, staff and other
responsibilities, taken as a whole, from such responsibilities immediately prior to the occurrence
of a Change in Control, or a change in the person or persons to whom Employee reported immediately
prior to the occurrence of a Change in Control, to a person or persons of lesser rank, title or
responsibility;

                    C. A reduction in the aggregate cash compensation (consisting of annual salary and Annual
Bonus) paid or to be paid to Employee by the Company in respect of any calendar year to an amount
which is more than 10% below the highest such aggregate cash compensation paid to Employee by the
Company with respect to any preceding calendar year;

                    D. A reduction in the aggregate benefits granted to Employee under the Benefit Plans and
Incentive Plans in any calendar year such that the aggregate value

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thereof to Employee is reduced by more than 10% from the highest value of the benefits granted
to Employee (determined on a consistent basis) for any calendar year after 1987;

                    E. Any failure by the Company to obtain the express written assumption of the Agreement by
agreement of any successor of the Company of any assignee of all or substantially all of its assets
at or prior to such succession or assignment (such assumption not relieving the Company of any
liability hereunder); or

                    F. Any material breach of this Agreement by the Company.

               (ii) Upon the expiration of the 30-day notice period provided in Section 5(b)(i), Employee’s
employment shall be terminated and Employee shall be relieved of his or her management position
with the Company and his or her duties hereunder. Upon Employee’s termination of employment with
the Company under this Section 5(b), Employee shall receive:

                    (t) subject to the terms thereof, all benefits which may be due to Employee under the
provisions of any Benefit Plan and Incentive Plan;

                    (u) a lump sum severance payment within 30 days following the effective date of such
termination in an amount equal to three times the sum of (1) Employee’s annual salary (including
for this purpose any deferred salary, if such a program has been offered by the Company) at the
rate in effect as of Employee’s termination of employment or immediately prior to the Change in
Control, whichever is greater, plus (2) the greater of (xx) the average of the two most recent
Annual Bonuses received by Employee immediately prior to Employee’s termination of employment or
immediately prior to the Change in Control, whichever is greater, and (yy) Employee’s then
applicable Target Bonus amount or the

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Employee’s applicable Target Bonus amount in effect immediately prior to the Change in
Control, whichever is greater;

               (v) in addition to any retirement benefits to which Employee is entitled under any defined
benefit pension plan, any supplemental retirement or excess benefit plan maintained by the Company,
TWI or any of their respective subsidiaries or any successor plans thereto (hereinafter
collectively referred to as the “Pension Plans”), a lump sum severance payment within 30 days
following Employee’s termination of employment, in an amount equal to the excess of (1) over (2),
where (1) equals the aggregate retirement pension to which Employee would have been entitled under
the terms of the Pension Plans (without regard to any amendment to the Pension Plans made
subsequent to the Change in Control and on or prior to Employee’s date of termination of
employment, which amendment adversely affects in any manner the computation of retirement benefits
thereunder), determined (A) as if Employee were fully vested thereunder, (B) as if Employee had
continued to be employed by the Company (after any termination pursuant to this Section 5) for such
additional period of time (the “Pension Period”), not exceeding three years, which would provide
the maximum payment to Employee under this subparagraph (v) but in no event shall Employee be
deemed to have continued to be employed by the Company after his or her normal retirement age as
defined in the Time Warner Cable Pension Plan, (C) as if Employee had accumulated compensation
during the Pension Period in an amount equal to the amount computed in Section 5(b)(ii)(u) and as
if such compensation was paid to Employee at the time each such amount would have been paid had
Employee remained an employee of the Company (as limited by Section 401(a)(17) of the Internal
Revenue Code of 1986, as amended (the Code”)) and (D) by taking into account any early retirement
subsidies associated therewith and Employee’s actual age at the expiration of the

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Pension Period and based on the assumptions provided in the Time Warner Cable Pension Plan for
purposes of calculating alternative forms of benefits, as a lump sum payment commencing at age 65
or any earlier date, but in no event earlier than the expiration of the Pension Period, whichever
lump sum value is greatest; and where (2) equals the aggregate vested retirement pension (taking
into account any early retirement subsidies associated therewith and determined, based on the
assumptions provided in the Time Warner Cable Pension Plan for purposes of calculating alternative
forms of benefits as a lump sum benefit commencing at age 65 or any earlier date, but in no event
earlier than the date of Employee’s termination of employment, whichever lump sum value is
greatest) to which Employee is then entitled pursuant to the provisions of the Pension Plans;

               (w) in addition to any benefits to which Employee is then entitled under any defined
contribution employee benefit plan maintained by the Company, TWI or any of their respective
subsidiaries or any successor plan thereto (the “Savings Plan”), a lump sum payment within 30 days
following Employee’s termination in an amount equal to three times Employee’s eligible compensation
(as defined below) times (1) the employer’s rate of contribution as a percentage of eligible
compensation to Employee’s accounts under the Savings Plan and any employer matching contribution
as a percentage of eligible compensation to Employee’s account under the Savings Plan, in each
case, for the calendar year immediately prior to Employee’s termination of employment or the
calendar year immediately prior to the Change in Control, whichever is greater, with Employee’s
eligible compensation defined as the lump sum severance payment in Section 5(b)(ii)(u) above
divided by three but subject to the limitations set forth in the definition of Compensation in each
Savings Plan, respectively, for each calendar year, or (2) if Employee was not eligible to
participate in the Savings Plan during

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the calendar year immediately prior to Employee’s termination of employment and the calendar
year immediately prior to the Change in Control on account of Employee’s failure to satisfy the
minimum age and/or service requirements, if any, for participation in the Savings Plan, the amount
which would have been contributed as employer contributions to Employee’s account under the Savings
Plan, had Employee been eligible to so participate, and had Employee participated at the highest
contribution rate permissible under the terms of the Savings Plan for the calendar year immediately
prior to Employee’s termination of employment or the calendar year immediately prior to the Change
in Control, whichever calendar year yields the greater contribution with Employee’s compensation
defined as the lump sum severance payment in Section 5(b)(ii)(u) above divided by three, but
subject to the limitation set forth in the definition of Compensation in each Savings Plan,
respectively, for each calendar year (the total cash payments payable to Employee under these
Sections 5(b)(ii)(u), (v) and (w) are hereinafter referred to as the “Severance Payment”);

               (x) for a period of three years beginning with Employee’s termination of employment, continued
eligibility and enrollment (including family coverage, if any), without a premium charge therefore,
in hospital, medical and dental insurance plans providing substantially equivalent benefit coverage
to those plans in which Employee was enrolled immediately prior to the Change in Control unless
waived in writing by Employee (or, in the event such coverage cannot be provided, substantially
similar benefits); provided, however, that benefits otherwise receivable by
Employee pursuant to this Section 5(b)(ii)(x) shall be reduced to the extent comparable benefits
are actually received by Employee from a subsequent employer during the three-year period following
Employee’s termination of

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employment, which comparable benefits actually received by Employee shall be reported by the
Employee to the Company upon the Company’s request;

                 (y) for a period beginning with Employee’s termination of employment under this Section 5(b)
(or any other Section hereof expressly referencing this provision) and ending on the earlier to
occur of (1) the expiration of one year or (2) his or her commencement of full-time employment with
a subsequent employer, the Company shall provide to Employee, without charge to Employee, the use
of reasonable office space and reasonable office facilities as designated by the Company, together
with reasonable secretarial services in each case appropriate to an employee of Employee’s position
and responsibilities prior to such termination of employment; and

                 (z) reimbursement of fees and expenses incurred for financial and tax counseling services
selected by Employee; provided that such reimbursement shall not exceed $10,000.

          (c) Retirement Option. Provided that, at the time of election, the Employee (x) is
actively employed by the Company, (y) has reached the age of 55, and (z) has been employed by the
Company as member of the Executive Group for at least five years the Employee may elect, by
providing written notice to the Company in the form attached hereto as Exhibit B, the Retirement
Option, as outlined below:

               (i) Within 15 days of the Employee’s exercise of the Retirement Option, the Company and the
Employee will attempt to agree upon the length a “Transition Period” of between six and 12 months.
The Transition Period shall commence as of the date of Employee’s written notice to the Company of
Retirement Option.

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                    A. If the parties are unable, within the 15-day period, to agree on the length of the
Transition Period, then the Transition Period shall be for six months.

                    B. During the Transition Period, the Employee will remain actively employed, at Employee’s
then-current rate of compensation, and, in addition to Employee’s other regular functions and
responsibilities, will assist the Company in identifying, recruiting, and training the Employee’s
replacement. The Employee will continue to be responsible for the management, direction, and
performance of his/her division, operating unit or department during the Transition Period to the
full extent that Employee was so responsible prior to the Transition Period.

               (ii) At the conclusion of the Transition Period, the term of employment hereunder will cease
and Employee will become an advisor to the Company (the “Advisory Period”) as follows:

                    A. The Advisory Period will extend for 36 months. During the Advisory Period, the Employee
will receive compensation as follows: (x) for the first 12 months, Employee’s then-current annual
salary and bonus; (y) for the second 12 months, annual salary, plus 50% bonus; and (z) for the
third 12 months, annual salary only. The bonus amount paid in (x) and (y) will be calculated as
follows: The bonus amount paid will be the greater of Target Bonus or the average of the two most
recent full year Annual Bonuses. All payments pursuant to this subsection shall be made in
accordance with the Company’s ordinary timing and procedures for salary and bonus compensation.

                    B. The Employee will continue to vest in any outstanding stock options and long-term cash
incentives (or any other similar plan) during the Advisory Period; however, the Employee will not
be entitled to any additional awards or grants. The

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Employee will also continue to be eligible to participate in any benefit plan (including
medical, dental and vision care, long-term disability, and life insurance) as if he/she were
actively employed during the Advisory Period. If the Employee elected premium reimbursement from
the Company in lieu of full group term life insurance, the payments in effect at the end of the
Transition Period will be continued until the end of the Advisory Period. If the Employee did not
elect premium reimbursement from the Company, group term life insurance equal to the amount
provided at the end of the Transition Period will be continued until the end of the Advisory
Period.

                    C. The Employee will not be provided with office space or secretarial services by the Company
during the Advisory Period. However, as soon as possible following the end of the Transition
Period, the Employee will receive a lump-sum payment of $10,000, less appropriate taxes and
deductions, as reimbursement for office expenses incurred during the Advisory Period. No further
payments or reimbursements will be made for office space or secretarial services during the
Advisory Period.

                    D. During the Advisory Period, the Employee will be eligible for reimbursement of financial
and estate planning expenses, in the same amount and under the same terms as other employees at
Employee’s level.

                    E. The Employee shall not be eligible for a Company-provided car or car allowance during the
Advisory Period. Any Company-provided car in the possession of the Employee will be returned by
Employee to the Company prior to commencement of the Advisory Period.

                    F. During the Advisory Period, the Employee will provide such advisory services concerning the
business, affairs and management of the Company as may

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be requested by the Company’s management, but shall not be required to devote more than five
days per month (up to eight hours per day), to such services. The services shall be performed at a
time and place mutually convenient to both parties. The Company will reimburse the Employee for any
expenses reasonably and necessarily incurred in providing such services, other than expenses of the
nature set forth in Section 5(c)(ii)(C). The Company may require proof of the expenses incurred,
via receipts or other appropriate documentation.

                    G. The election of this Retirement Option, including the compensation and benefits payable
during the Transition Period and the Advisory Period described herein above, are in lieu of any and
all benefits, compensation, and payments otherwise available under this Agreement. Employee shall
have no further rights to such compensation and benefits hereunder, except as outlined in this
Section 5(c), once Employee elects this Retirement Option. Employee will continue to be bound to
Employee’s obligations under this Agreement, except where expressly modified herein.

                    H. If the Employee accepts other employment during the Advisory Period, (1) he/she will be
terminated from payroll and will receive a lump-sum payment for the balance of the salary and
bonuses payable during the Advisory Period and (2) his/her participation in all incentive, benefit
and insurance plans or perquisites of the Company including Stock Option and Long Term Cash Plans,
shall be determined in accordance with Company procedures and plan documents. Notwithstanding the
preceding sentence, if the Employee accepts employment with any not-for-profit Entity (defined as
an entity that is exempt or in the process of obtaining exemption from federal taxation under
Section 50l(c)(3) of the Internal Revenue Code), then the Employee shall be entitled to remain on
the payroll of the Company and receive the payments as provided above.

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                    I. Unless specifically requested by the Company, the Employee will not be expected to attend
any management meetings, trade shows, conferences, or other similar events or activities, and will
not be reimbursed for the costs of such activities during the Advisory Period.

                    J. The Employee’s election of the Retirement Option as outlined herein shall be irrevocable.

                    K. The Employee shall, in partial consideration for the payments to be made pursuant to
Employee’s election of the Retirement Option, execute and deliver to the Company a release as
described in Section 6(b).

     6. Termination by Company.

          (a) For Cause. Provided that notice of termination has not previously been given
under any other Section hereof, the Company shall have the right to terminate Employee’s employment
for cause upon written notice to Employee at any time. In such event, Employee’s employment with
the Company shall terminate immediately and Employee shall be entitled to receive (i) any earned
and unpaid annual salary accrued through the date of such termination, and (ii) subject to the
terms thereof, any benefits which may be due to Employee under the provisions of any Benefit Plan
and Incentive Plan. Employee hereby disclaims any right to receive a pro rata portion of his or her
Annual Bonus with respect to the year in which such termination occurs. For purposes hereof,
“cause” shall mean that Employee (x) has materially breached this Agreement resulting in material
financial loss or substantial embarrassment to the Company and, after having been given written
notice thereof by the Company, Employee has failed to correct such breach within 30 days after
receipt of such notice, or (y) has been convicted

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of, or has pleaded nolo contendere to, a felony, whether or not related to the affairs of the
Company, and whether or not any right to appeal has been exercised.

          (b). Other. Provided that notice of termination has not previously been given under
any other Section hereof, the Company shall have the right at any time to terminate Employee’s
employment under this Agreement without cause, by giving written notice thereof to Employee.

               (i) If such notice is given to Employee within three years following the occurrence of a
Change in Control, Employee shall be entitled to receive, subject to the terms thereof, all
benefits which may be due to Employee under the provisions of any Benefit Plan and Incentive Plan
and all other payments and benefits in the amounts and upon the terms and conditions provided in
Sections 5(b)(ii)(u), (v), (w), (x), (y) and (z).

               (ii) If such notice is so given to Employee prior to the occurrence of a Change in Control, or
more than three years following a Change in Control, Employee shall be entitled to receive, subject
to the terms thereof, all benefits which may be due to Employee under the provisions of any Benefit
Plan and Incentive Plan, and to elect, within 30 days after receiving such notice, either (A) to
receive an amount equal to the payment provided in Section 5(b)(ii)(u) or (B) be placed on a leave
of absence (the “Leave”) as an inactive employee of the Company for a period (as determined by
Employee) of up to three years following the date notice of termination is given by the Company
pursuant to this Section 6(b), in which case Employee shall be relieved of his or her management
position with the Company and his or her duties hereunder, and shall continue to receive both
annual salary at an annual rate equal to his or her annual rate in effect immediately prior to his
or her termination of employment and Annual Bonuses in respect of each of such three calendar years
(in each case payable in accordance with the regular

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practices of the Company), each such bonus to be in an amount equal to the greater of (xx) the
average of the two most recent full year Annual Bonuses earned by the Employee immediately prior to
his or her termination of employment and (yy) Employee’s then applicable Target Bonus amount;
provided, however, that if Employee accepts full time employment with any other
person or corporation, partnership, trust, government or other entity (“Entity”) during such
three-year period or notifies the Company in writing of his or her intention to terminate his or
her employment during such period, Employee shall cease to be an employee of the Company effective
upon the commencement of such employment, or the effective date of such termination as specified by
Employee in such notice, and shall be entitled to receive, subject to the terms thereof, all
benefits due to Employee under the provisions of any Benefit Plan and Incentive Plan and a lump sum
cash payment for the balance of the salary and bonuses Employee would have been entitled to receive
pursuant to this Section 6(b)(ii)(B) had Employee remained on the Company’s payroll until the end
of the three-year period; provided further, however, that Employee shall
not be entitled to receive such lump sum cash payment if he or she accepts full-time employment
with any subsidiary or Affiliate of the Company. For purposes of this Agreement, the term
“Affiliate” shall mean any Entity which, directly or indirectly, controls, is controlled by, is
under the control of, or is under common control with, the Company.

     For the period beginning when Employee receives such notice of termination from the Company,
and ending one year thereafter, Employee will, without charge to Employee, have use of reasonable
office space and facilities as designated by the Company, together with reasonable secretarial
services in each case appropriate to an employee of Employee’s position and responsibilities prior
to such termination of employment. Employee will continue to be eligible to participate in the
Company’s Benefit Plans and to receive, subject to the terms thereof, all

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benefits which are received by other employees at Employee’s level thereunder; however, except
as otherwise provided herein, Employee will not be entitled to any awards or grants under any
Incentive Plan, and Employee shall not be entitled to a Company-provided vehicle. Employee shall
return any Company provided vehicle to the Company within 30 days of the date of the Company’s
Notice of Termination of Employee.

     If Employee leaves the payroll of the Company within one year after notice of termination is
given to Employee under this Section 6(b), any aggregate lump sum payment due to Employee in
accordance with Section 6(b)(ii)(B) shall be paid in two installments as follows: 75% of such
amount shall be paid at the time Employee leaves the Company’s payroll, and the remaining 25% shall
be paid to Employee on the date which is one year after such notice of termination has been given.

     In the event that Employee’s employment is terminated, then, in partial consideration for the
Company’s obligation to make the payments described in this Section 6(b), Employee shall execute
and deliver to the Company a Release containing language similar to the form as set forth in
Exhibit C. The Company shall deliver such Release to Employee within a reasonable period of time
after Employee has made the election provided for in this Section 6(b). If Employee shall fail to
execute and deliver to the Company such Release with 30 days of Employee’s receipt thereof from the
Company, Employee’s employment with the Company shall terminate effective at the end of such 30-day
period and Employee shall receive, in lieu of the severance arrangements described in Section
6(b)(ii), a lump sum cash payment in an amount determined in accordance with the personnel policies
of the Company then applicable.

     7. Death Benefit; Life Insurance; Disability. Provided that the term of employment has
not been earlier terminated hereunder, upon the death of the Employee, this Agreement and

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all benefits hereunder shall terminate (except as otherwise provided in any benefit, savings,
incentive or other plan or program of the Company), except that the Employee’s estate (or a
designated beneficiary thereof) shall be entitled to receive: 1) If Company paid Life Insurance
above $50,000 has been waived, Company paid Life Insurance of $50,000 (and Employee will be
entitled to his/her Group Universal Life Insurance death benefit from the insurance company if any
has been elected); or, 2) Company paid Life Insurance equal to three years’ of Employee’s Base
Salary plus bonus compensation based on the greater of (a) the average of the regular Annual Bonus
amounts (excluding the amount of any special or spot bonuses) received by the Employee from the
Company for the most recent two years, times 3, or (b) the Employee’s then applicable Target Bonus
amount multiplied by 3.

     Further, during the period the Employee is receiving periodic payments under Section
6(b)(ii)(B), the Employee will be provided with the Life Insurance benefit available prior to
termination. If the Employee elected premium reimbursement from the Company in lieu of Company-paid
group term life insurance, the payments in effect prior to the date notice of termination is given
will be continued through the end of the salary continuation period. If the Employee did not elect
premium reimbursement from the Company, group term life insurance equal to the amount provided
prior to the date notice of termination is given will be continued through the end of the salary
continuation period.

          (b) Disability. Provided that notice of termination has not previously been given
under any Section hereof, if Employee becomes ill or is injured or disabled during the term of this
Agreement such that Employee fails to perform all or substantially all the duties to be rendered
hereunder and such failure continues for a period in excess of 26 consecutive weeks (a
“Disability”), the Company may terminate the employment of Employee under this Agreement

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upon written notice to Employee at any time and thereupon Employee shall be entitled to
receive (i) any earned and unpaid annual salary accrued through the date of such termination, (ii)
subject to the terms thereof, any benefits which may be due to Employee under the provisions of any
Benefit Plan and Incentive Plan, and (iii) a lump sum cash payment equal to three times Employee’s
then current annual salary and then applicable Target Bonus amount.

     8. Stock Options and Other Incentive Awards. Upon Employee’s termination of
employment with the Company for any reason, Employee’s rights to benefits and payments under any
stock options, restricted shares or other Incentive Plans shall be determined in accordance with
the terms and provisions of such Plans and any agreements under which such stock options,
restricted shares or other awards were granted. Subject to the terms of such Plans, in the event of
a termination of this Agreement pursuant to the terms hereof, Employee shall continue to be an
employee of the Company for purposes of any stock option and restricted shares agreements and any
other Incentive Plan awards until such time as Employee shall leave the payroll of the Company.

     9. Change in Control. For purposes of this Agreement, a “Change in Control” of TWI
shall be deemed to have occurred in the event (i) the Board of Directors of TWI (the “Board”) (or,
if approval of the Board is not required as a matter of law, the stockholders of TWI) shall approve
(a) any consolidation or merger of TWI in which TWI is not the continuing or surviving corporation
or pursuant to which shares of Common Stock of TWI (“Common Stock”) would be converted into cash,
securities or other property (other than a merger of TWI in which the holders of Common Stock
immediately prior to the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, such as, for example, a merger effected solely
in order to change the state of

20

 

incorporation of TWI), or (b) any sale, lease, exchange, or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of TWI’s assets, or (c) the
adoption of any plan or proposal for the liquidation or dissolution of TWI, or (ii) any person (as
such term is defined in Sections 13(d)(3) and 14(d)(2), of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) or Entity (other than TWI or any benefit plan sponsored by TWI or any
subsidiary) (a) shall purchase any of TWI’s Common Stock (or securities convertible into TWI’s
Common Stock) for cash, securities or any other consideration pursuant to a tender offer or
exchange offer, without the prior consent of the Board, or (b) shall become the “beneficial owner”
(as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of TWI representing 20% or more of the combined voting power of TWI’s then outstanding
securities ordinarily (and apart from rights accruing under special circumstances) having the right
to vote in the election of directors (calculated as provided in paragraph (d) of such Rule 13d-3 in
the case of rights to acquire TWI’s securities), or (iii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the entire Board shall cease for
any reason to constitute a majority thereof unless the election, or the nomination for election by
TWI’s stockholders, of each new director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the period; provided,
however, that no such event shall be a Change in Control unless, at the time such event
occurs, TWI owns, directly or indirectly, more than 50% of the voting power of the outstanding
voting stock of the Company.

     10. Section 4999 Rules. In the event that Employee becomes entitled to the Severance
Payment, and notwithstanding any provisions to the contrary contained in this Agreement or any
other plan, arrangement or agreement including, without limitation, any stock

21

 

option, restricted stock, or similar plan or agreement with the Company, any person whose
actions result in a Change in Control or any person affiliated with the Company or such person
(such plans, arrangements and agreements being hereinafter referred to as the “Plans”), if any
payments or benefits received or to be received by Employee in connection with a Change in Control
or Employee’s termination of employment, whether pursuant to the terms of this Agreement or any
Plan, together with the amount, if any, by which any amount previously paid to Employee pursuant to
any Plan was reduced in order to avoid the imposition of the Excise Tax (as hereinafter defined)
(such amounts being hereinafter referred to as the “Parachute Payments”) would be subject to any
excise tax imposed under section 4999 of the Code (or any similar tax that may hereafter be
imposed) (the “Excise Tax”), then the Company will pay to Employee, within 30 days following the
effective date of Employee’s termination of employment, an additional amount (the “Gross-Up
Payment”) such that the net amount retained by Employee, after deduction of any Excise Tax on the
Parachute Payments and any federal, state and local income tax and Excise Tax upon the payment
provided for by this Section 10 will be equal to the Parachute Payments. For purposes of
determining whether any of the Parachute Payments will be subject to the Excise Tax and the amount
of such Excise Tax, (i) any other payments or benefits received or to be received by Employee in
connection with a Change in Control or Employee’s termination of employment (whether pursuant to
the terms of this Agreement or any Plan) shall be treated as “Parachute Payments” within the
meaning of Section 280G(b)(2) of the Code, and all “excess Parachute Payments” within the meaning
of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax, unless in the
opinion of counsel selected by Employee, such other payments or benefits (in whole or in part) do
not constitute Parachute Payments, or such excess Parachute Payments (in whole or in part)
represent reasonable compensation for services

22

 

actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the “base
amount” within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the
Excise Tax, (ii) the amount of the Parachute Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of the Parachute Payments or (B)
the amount of excess Parachute Payments within the meaning of Section 280G(b)(1) of the Code (after
applying clause (i), above), and (iii) the value of any non-cash benefits or any deferred payment
or benefit shall be determined by the Company’s independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of
the Gross-Up Payment, Employee shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rate of taxation in the state and locality
of Employee’s residence on the date of his or her termination of employment, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken
into account hereunder at the time of termination of Employee’s employment, Employee shall repay to
the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax imposed on the
Gross-Up Payment being repaid by Employee to the extent that such repayment results in a reduction
in Excise Tax and/or a federal, state or local income tax deduction) plus interest on the amount of
such payment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at the time of the
termination of

23

 

Employee’s employment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by
Employee with respect to such excess) at the time that the amount of such excess is finally
determined.

     The Company shall pay all legal fees, court costs, fees of experts and other costs and
expenses when incurred by Employee in connection with Employee’s interpretation of, or
determinations under, or any actual, threatened or contemplated litigation or legal, administrative
or other proceeding involving the provisions of this Section 10, whether or not initiated by
Employee.

     11. Trade Secrets; Work Product, Etc. Except in connection with the performance of
his or her duties hereunder, Employee hereby expressly covenants and agrees that Employee will not
at any time while employed by the Company or thereafter, exploit, use, sell, publish, disclose,
communicate or divulge to any person or Entity, other than the Company and its subsidiaries, either
directly or indirectly, any trade secrets or confidential information, knowledge or data regarding
the Company or any of its subsidiaries or Affiliates or any of their respective officers, directors
or employees including, without limitation, the existence and terms of this Agreement, other than
such information, knowledge or data which has been released by the Company or such subsidiaries,
Affiliates or others to the public (except that with respect to the terms of this Agreement
Employee may communicate such terms to Employee’s spouse and Employee’s attorneys and financial
advisors). Notwithstanding the foregoing, Employee may disclose such trade secrets or confidential
information, knowledge, data or terms when required to do so by a court or government agency or
legislative body of competent jurisdiction, provided

24

 

Employee first notifies the Company orally and in writing as promptly as possible of such
requirement so that the Company may either seek an appropriate protective order or waive compliance
with the provisions of this Section, and provided further that if, in the absence
of such protective order or waiver, Employee is nevertheless, in the written opinion of his or her
counsel, reasonably acceptable to the Company, addressed to and delivered to the Company, otherwise
required to disclose such information to any such court, government agency or legislative body or
else stand liable for contempt or suffer other material penalty, Employee may disclose such
information in such case without liability hereunder so long as such disclosure does not exceed
that required by such court, government agency or legislative body.

     Employee hereby grants and assigns to the Company all rights (including, without limitation,
any copyright or patent) in the results and proceeds of all services provided by Employee hereunder
and all such services shall be subject in all respects to the supervision, control and direction of
the Company. Any work in connection with such services shall be considered “work made for hire”
under the Copyright Law of 1976 or any successor thereof, and the Company shall be the owner of
such work as if the Company were the author of such work. Employee will execute and deliver to the
Company any documents or instruments evidencing the Company’s ownership thereof as reasonably
requested by the Company. The provisions of this Section are in addition to, and not in limitation
of, any separate agreement regarding similar matters executed by the Employee.

     12. Non-Compete; Solicitation. Employee hereby expressly covenants and agrees that:

          (a) Employee will not at any time while employed by the Company and additionally for the
Extended Period, be or become an officer, director, partner or employee of or

25

 

consultant to or act in any managerial capacity with or own any equity interest in, any person
or Entity (an “Affiliated Person”) which is a “Competitive Business Entity” (as such term is
defined on Exhibit D hereto); provided, however, that ownership of less than 1% of
the outstanding equity securities of any Entity listed on any national securities exchange or
traded on the National Association of Securities Dealers Automated Quotation System shall not be
prohibited hereby.

          The “Extended Period” shall mean a period of one year following (1) the date (A) Employee’s
term of employment ceases under Section 5(c), or under the terms of any other retirement plan
maintained by the Company or its Affiliates, (B) Employee’s employment terminates under Section
5(a), 5(b) or 6(a), or (C) notice of termination is given under Section 6(b) (each of (A), (B) and
(C) being referred to herein as a “Deemed Termination”).

          (b) Employee will not at any time while employed by the Company and additionally for the
Extended Period, solicit (or assist or encourage the solicitation of) any employee of the Company
or any of its subsidiaries or Affiliates to work for Employee or for any person or Entity in which
Employee owns or expects to own more than a 1% equity interest or for which Employee serves or
expects to serve as an Affiliated Person.

          For the purposes of this Section 12(b), the phrase “solicit any employee” shall mean
Employee’s contacting, or providing information to others who may be expected to contact, any
employee of the Company or any of its subsidiaries or Affiliates regarding their employment status,
job satisfaction, interest in seeking employment with Employee or any Affiliated Person or any
related matter, but shall not include general print advertising for personnel or responding to an
unsolicited request for a personal recommendation for or evaluation of an employee of the Company
or any of its subsidiaries or Affiliates.

26

 

     13. Documents; Conduct. Employee hereby expressly covenants and agrees that:

          (a) Following any Deemed Termination (as defined in Section 12(a)) or at any time upon the
Company’s request, Employee will promptly return to the Company all property of the Company and its
subsidiaries and Affiliates in his or her possession or control (whether maintained at his or her
office, home or elsewhere), including, without limitation, all copies of all management studies,
business or strategic plans, budgets, notebooks and other printed, typed or written materials,
documents, diaries, calendars and data of or relating to the Company or its subsidiaries or
Affiliates or their respective personnel or affairs; and

          (b) Employee will not at any time denigrate, ridicule or intentionally criticize the Company
or any of its subsidiaries or Affiliates or any of their respective products, properties,
employees, officers or directors, including, without limitation, by way of news interviews, or the
expression of personal views, opinions or judgments to the news media or in any type of public
forum.

     14. Breach by Employee. Employee hereby expressly covenants and agrees that the
Company will suffer irreparable damage in the event any provisions of Sections 11, 12 and 13 are
not performed or are otherwise breached and that the Company shall be entitled as a matter of right
to an injunction or injunctions and other relief to prevent a breach or violation by Employee and
to secure its enforcement of Sections 11, 12 and 13. Resort to such equitable relief, however,
shall not constitute a waiver of any other rights or remedies which the Company may have.

     15. Representations.

          (a) Employee represents and warrants to the Company that this Agreement is legal, valid and
binding upon Employee and Employee is not a party to any agreement or

27

 

understanding which would prevent the fulfillment by Employee of the terms of this Agreement.
Employee has consulted with his or her legal, tax, financial and other advisors prior to execution
and delivery of this Agreement.

          (b) The Company represents and warrants to Employee that this Agreement is legal, valid and
binding upon the Company and the Company is not a party to any agreement or understanding which
would prevent the fulfillment by the Company of the terms of this Agreement.

     16. Notice. Any notice required or permitted to be given hereunder shall be in
writing (except where required to be given orally) and shall be sufficiently given if sent by
registered or certified mail or delivered, in person, if to Employee at the address set forth on
the last page hereof, or at such other address as Employee shall designate by written notice to the
Company, and if to the Company at 290 Harbor Drive, Stamford, Connecticut 06902-6732, attention of
the General Counsel or at such other address as the Company shall designate by written notice to
Employee.

     17. Successors and Assigns. This Agreement is personal in its nature and neither of
the parties hereto shall, without the consent of the other, assign or transfer this Agreement or
any right or obligations hereunder; provided however, that the provisions hereof
shall inure to the benefit of, and be binding upon, any successor of the Company, whether by
merger, consolidation, transfer of all or substantially all of the assets of the Company, or
otherwise.

     18. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, irrespective of its conflicts of law rules,
except for the By-laws referred to in Section 29, which shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware.

28

 

     To the extent that any applicable state or Federal law, rule or regulation confers upon
Employee any greater benefit or right than that set forth in this Agreement, such law, rule or
regulation shall control in lieu of the provisions hereof relating to such benefit or right.

     19. Mitigation. Employee shall have no obligation to mitigate damages in the event of
termination of Employee’s employment under this Agreement under Section 5(b), 6(b) or 7, and,
except as specifically provided in Section 5(b)(ii)(x), any payments received by Employee hereunder
shall not be offset or reduced in any way by any other earnings or payments which may be received
by Employee from any source. It is acknowledged and agreed that any payment which may be made by
the Company or TWI to Employee under Section 5(b), 6(b) or 7 is in the nature of severance and is
not a penalty payment.

     20. Withholding. All payments required to be paid by the Company to Employee under
this Agreement will be paid in accordance with the payroll practices of the Company or the terms of
the Benefit and Incentive Plans, as the case may be, and will be subject to withholding taxes,
social security and other payroll deductions in accordance with the Company’s policies applicable
to employees at Employee’s level and the terms of the Benefit and Incentive Plans.

     21. Complete Understanding. This Agreement supersedes any prior contracts,
understandings, discussions and agreements relating to employment between Employee, on the one
hand, and the Company and its subsidiaries and Affiliates, on the other, and constitutes the
complete understanding between the parties with respect to the subject matter hereof. No statement,
representation, warranty or covenant has been made by either party with respect thereto except as
expressly set forth herein.

29

 

     22. Modification; Waiver. This Agreement cannot be changed, modified or amended and
no provision or requirement hereof may be waived without the consent in writing of both the parties
hereto. No waiver by either party at any time of any breach by the other party of any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Subject to Section 31, no policy,
procedure or practice of the Company or TWI whether in effect at the time of this Agreement or
thereafter shall be deemed to modify, amend or supersede any provision of this Agreement except as
contemplated or provided otherwise in this Agreement.

     23. Headings. The headings in this Agreement are for convenience of reference only
and shall not control or affect the meaning or construction of this Agreement.

     24. Use of Likeness. The Company and TWI shall have the right to use Employee’s name,
biography and likeness in connection with their respective businesses and that of their
subsidiaries and Affiliates, but not for use as a direct endorsement.

     25. Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

     26. Time Warner Inc. If, prior to a Change in Control, TWI shall at any time cease to
beneficially own, either directly or indirectly, more than 50% of the voting power of the
outstanding voting stock of the Company, then all references in this Agreement to TWI or a Change
in Control shall thereafter not apply and shall be deemed to be deleted from this Agreement, but
the validity and enforceability of all other provisions of this Agreement, except as otherwise
specifically provided, shall remain in full force and effect.

30

 

     27. Set-off. The Company and its subsidiaries and Affiliates shall have no right to
set-off payments owed to Employee hereunder against amounts owed or claimed to be owed by Employee
to the Company or its subsidiaries or Affiliates under this Agreement or otherwise.

     28. Legal Fees. In addition to any obligation the Company may have under Sections 10
and 29, the Company shall promptly pay, upon demand by Employee, a reasonable hourly attorney’s
fee, all court costs, reasonable hourly fees of experts, and other reasonable costs and expenses
when incurred by Employee arising after a Change in Control in connection with any actual,
threatened or contemplated litigation or legal, administrative or other proceeding relating to this
Agreement to which Employee is or expects to become a party, whether or not initiated by Employee.
Subject to any rights of Employee under Section 29, if the Company or, if the Company is not a
party to such litigation or proceeding, the party opposing Employee shall prevail on the merits in
respect of any such claim in respect of this Agreement in any such litigation or proceeding (but in
no other case), then, after all rights of appeal have been exercised or lapsed, Employee shall
promptly repay to the Company the amounts previously paid to Employee under this Section in respect
of such claim, but without interest thereon. The foregoing sentence shall not apply with respect to
any litigation or proceeding under Section 10.

     29. Indemnification. The Company shall indemnify Employee to no lesser extent than
provided in the Company’s By-laws (the provisions of which are hereby incorporated by reference
herein) in effect on the date of the original Agreement or the date of this Agreement (whichever is
the greater extent of indemnification) notwithstanding any changes or amendments to such By-laws
adversely affecting, limiting or reducing such indemnification.

31

 

     30. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall constitute one and the same
instrument.

     31. Changes. The Company and its subsidiaries and Affiliates are entitled to amend,
modify, terminate or otherwise change at any time or from time to time any and all Benefit Plans,
Incentive Plans and policies, practices or procedures referred to in this Agreement, and all
references herein to such Benefit Plans, Incentive Plans and policies, practices and procedures
shall be to such as from time to time in effect except as otherwise specifically herein provided.

     32. Resolution of Disputes. Except as provided for in Section 14 above, the Company
and the Employee agree that any claim, dispute, controversy or the like (collectively, the
“Dispute”) arising out of or relating to this Agreement (including the Exhibits annexed hereto),
including, without limitation, its validity or a breach thereof, shall be resolved by binding
arbitration in accordance with the rules of the Commercial Tribunal of the American Arbitration
Association (“AAA”). The Company and the Employee further agree that any Dispute relating to,
arising in the context of, or being asserted for the first time after, termination of the term of
employment including but not limited to any alleged violation of any local, state or federal
anti-discrimination statute or ordinance, or any Dispute that Employee was subjected to
discriminatory harassment in violation of any local, state or federal anti-discrimination statute,
shall also be resolved by binding arbitration in accordance with the rules of the AAA. The Company
and the Employee expressly waive their rights. if any, to a trial of any such Disputes by a jury.

     The Company and the Employee agree that (a) any Dispute shall be arbitrated by three neutral
arbitrators who shall issue a written opinion and award, (b) the award may be vacated in

32

 

the event of bias. corruption, fraud or where an arbitrator exceeds his/her powers, and (c)
judgment upon the award may be entered in any court having jurisdiction thereof.

     The Employee may choose to have the arbitration hearing take place in either Stamford,
Connecticut, or New York City, New York. The Company agrees that if the Employee is the prevailing
party in such arbitration, the Company shall pay the arbitrators’ fees and related AAA
administrative costs.

     IN WITNESS WHEREOF, Employee and the Company have caused this Agreement to be executed as of
the date first above written.

	 	 	 	 	 
	 	 	TIME WARNER ENTERTAINMENT COMPANY, L.P.,
through its Time Warner Cable Division
	 
	 	 	 	 
	 

	 	By: 
	/s/ Joe Collins
	 

	 	 	 

Agreed to and accepted as of

the date first above written

	 	 	 
	/s/ Marc J. Apfelbaum
	 	 
	 

Marc Apfelbaum

	 	 
	Senior Vice President, General Counsel and Secretary

Annual
Salary: $291,100.00

Target
Annual Bonus Percentage: 50%

Address for Notices:

440 West End Avenue, #14C

New York, NY 10024

33

 

Exhibit A

(Date)

Dear (Employee)

In accordance with the provisions of Section 1 of the Amended and Restated Employment and
Termination Agreement (the “Agreement”) dated as of January 1, 2000, between you and Time Warner
Cable (the “Company”), notice is hereby given to you of the Company’s determination to extend the
term of the Agreement for an additional year.

Please indicate your acceptance of the foregoing extension of the Agreement by signing the enclosed
copy of this letter and returning it to the Company by December 20th. Pursuant to Section 1 of the
Agreement, failure to do so will be deemed an election by you to terminate your employment without
cause pursuant to Section 5(a) of the Agreement.

Very truly yours,

TIME WARNER CABLE, A Division of

TIME WARNER ENTERTAINMENT COMPANY, L.P.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Accepted:	 	 
	 
	 	 	 	 
	 	 	 
	Signature	 	 
	 
	 	 	 	 
	 	 	 
	Date	 	 

1

 

Exhibit B

Time Warner Cable

290 Harbor Drive

Stamford, Connecticut 06902-2266

Attention: General Counsel

Dear [Marc]:

Pursuant to Section 5(c) of my Employment Agreement, this is to advise you of my election of the
Retirement Option provided therein, effective as of the date of this letter.

Pursuant
to Section 5(c)(i), I suggest a Transition Period of ___ months, ending on
                                        .

Sincerely yours,

[Employee]

2

 

Exhibit C

CONFIDENTIAL

SEPARATION AGREEMENT AND RELEASE

          This Separation Agreement and Release (this “Agreement”), effective as of the date set forth
in Paragraph 30 below, is made and entered into by and between Time Warner Cable (the “Company”), a
division of Time Warner Entertainment Company, L.P., and                                                              (the
“Employee”). The Company and Employee are from time to time referred to herein as the “parties.” By
this Agreement, the parties intend to, and do hereby settle any and all differences, disputes,
grievances, claims, charges and complaints, whether known or unknown, accrued or unaccrued, actual
or alleged that Employee either has or arguably may have against the Company, its affiliates
including, but not limited to, Time Warner Inc., and each of their respective subsidiaries or
predecessors or successors thereto (hereinafter respectively “Affiliates” and “Subsidiaries”) or
that the Company, its Affiliates or Subsidiaries either have or arguably may have against Employee,
as discussed herein.

          In consideration of the mutual covenants, conditions and obligations set forth herein, the
parties agree as follows:

          [1. Pursuant to Section 6(b)(ii)(A) of the Amended and Restated Employment and Termination
Agreement, dated as of June 1, 2000, between the Company and Employee (“the Employment Agreement”),
Employee shall receive a one-time lump sum payment equal to $                    .].

          [1. Pursuant to Section 6(b)(ii)(B) of the Amended and Restated Employment and Termination
Agreement, dated as of June 1, 2000, between the Company and Employee (the “Employment Agreement”),
Employee shall be placed on a leave of absence (the “Leave”) as an

3

 

inactive employee of the Company for 36 months following the date of termination of the term
of employment, whether or not he/she becomes disabled as provided for in Section 7(b) of the
Employment Agreement. During the Leave, Employee shall receive his/her regular annual earnings of
$               
      less statutory deductions and other voluntary deductions (i.e., group insurance) paid
biweekly through                     . Employee shall also receive an Annual Incentive Plan bonus (AIP)
payment of $             
        each year, less statutory deductions, for three years, payable in [month] of
              
      ,        
             , and
              
      . [The Employee shall also receive a
prorated payment of $         
           
to be paid in February of           
          .] If the Employee accepts full-time employment with any other
person or Entity during such Leave or notifies the Company in writing of his/her intention to
terminate his/her status as an inactive employee on Leave, then the Employee will be terminated
from payroll and will receive, subject to the terms thereof, all benefits due to Employee under the
provision of any Benefit Plan and Incentive Plan and a lump sum payment in an amount representing
the balance of the annual salary and bonuses payable during the three-year period pursuant to
Section 6(b)(ii)(B) of the Employment Agreement. (Notwithstanding the preceding sentence, if the
Employee accepts full-time employment with any subsidiary or Affiliate of the Company (for this
purpose only, as “Affiliate” is defined in the Employment Agreement), then the periodic annual
salary and bonus payments provided for in Section 6(b)(ii)(B) of the Employment Agreement shall
cease, and the Employee shall not be entitled to any such lump sum payment.) If the Employee leaves
payroll within one year after separation from the Company, any lump-sum payment will be paid in two
installments. At the time the Employee leaves payroll, 75% will be paid; the remaining 25% will be
paid on the first anniversary date of the notice of termination. By signing this agreement

4

 

Employee acknowledges his obligation to inform the Company of the date the new position will
commence immediately after accepting other employment.

          2. The parties agree that Employee’s Time Warner stock options granted under the Time Warner
Stock Option Plan (the “Option Plan”) will continue to vest during the period the Employee remains
on payroll.

          3. The parties agree that the Employee’s rights under the Time Warner Cable Long Term Cash
Plan shall be determined by the provisions of the Plan as in effect on the date of this Agreement.
If active employees receive payments for any cycles of this Plan for which the Employee received a
grant, the Employee will be eligible to receive a payment at the end of each cycle. Any such
payments will be prorated based on the date the Employee terminates from payroll. The Employee
received grants under the                     ,                     , and                      Long Term Cash Plans.

          4. The parties agree that the Employee’s pension rights and rights in the Time Warner Cable
Savings Plan shall be determined by the provisions of the Time Warner Cable Pension Plan and
Savings Plan, respectively, as in effect on the date of this Agreement (collectively, the “Pension
and Savings Plans”). Further, the parties agree that full distribution of the Employee account
balances held in the Time Warner Cable Savings Plan may occur following termination of the Employee
from payroll, upon Employee’s request.

          5. The parties agree that the Employee will be provided with coverage under the Company’s
group insurance plans at the employee contribution rate as long as the Employee remains on payroll.
The Employee will be subject to any increases in employee contributions and any changes in the
group insurance benefit package which occur during the salary continuation period. Following
termination of group insurance benefits, the Employee may continue medical,

5

 

dental, and vision coverage for up to eighteen (18) months by following the applicable COBRA
procedures and paying the full monthly premium.

          6. The parties agree that the Employee will be provided with the life insurance benefits and,
if elected, premium reimbursements as specified under his/her Employment Agreement as long as the
Employee remains on payroll.

          7. Based on the Company’s payroll records as of                      and the termination date of
                    ,
Employee’s unused vacation balance is ___ hours. Assuming payroll records are
current, this would result in a vacation payout of ___. The parties agree the vacation balance
will be verified prior to payout.

          8. Under the Employment Agreement, the Employee is entitled to reasonable office space and
facilities as designated by the Company, together with reasonable secretarial services, at no cost
to the Employee for the one year period following the date of termination of active employment
(insert date).

          9. The parties agree that the Employee will be eligible for reimbursement of financial
counseling expenses during the period he remains on payroll, provided active employees at his level
receive these benefits. Financial counseling expense reimbursement will be limited to the amounts
available to active employees at the Employee’s level.

          10. Employee does hereby release and forever discharge the Company and its Affiliates and
Subsidiaries and each of their respective officers, shareholders, subsidiaries, agents, successors,
predecessors, assigns, and employees and their respective agents, heirs, executors, administrators,
estates, beneficiaries and representatives, of and from any and all actions, causes of action,
claims, or demands for general, special or punitive damages, attorneys’ fees, expenses, or other
compensation, that in any way relate to or arise out of Employee’s

6

 

employment with the Company and/or its Affiliates and Subsidiaries or the termination of such
employment which Employee may now or hereafter have, under any federal, state or local law,
regulation or order (including without limitation, under the Age Discrimination in Employment Act,
29 U.S.C. § 621 et seq., as amended, through and including the date of this Agreement), or
otherwise. This release shall not apply to any act of fraud or criminal conduct by the Company, its
Affiliates or Subsidiaries, of which Employee is not aware as of the date of this Agreement, nor to
any act of non-compliance with terms of this Agreement by the Company.

          11. The Company, its Affiliates and Subsidiaries, do hereby release and forever discharge
Employee, his/her agents, heirs, executors, administrators, estate, beneficiaries and
representatives, of and from any and all actions, causes of action, claims or demands for general,
special, and punitive damages, attorneys’ fees, expenses, and other compensation, that in any way
relate to or arise out of the Company’s employment of Employee or the termination of such
employment which the Company, its Affiliates or Subsidiaries may now or hereafter have, under any
federal, state, or local law, regulation, or order, as amended, or otherwise, through and including
the date of this Agreement. This release shall not apply to any act of fraud or criminal conduct by
Employee of which the Company, its Affiliates or Subsidiaries are not aware as of the date of this
Agreement, nor to any act of non-compliance with terms of this Agreement by Employee.

          12. Employee agrees that this Agreement shall terminate upon his/her death, and thereupon the
Company shall not have any obligations hereunder, except that Employee’s estate or beneficiaries
shall be entitled to all unpaid compensation payable to Employee hereunder and to all other
benefits which may be due to Employee and Employee’s estate or

7

 

beneficiaries at the time under the general provisions of any employee benefit plan of the
Company in which Employee is then a participant.

          13. Employee hereby expressly covenants and agrees that Employee will not at any time exploit,
use, sell, publish, disclose, communicate or divulge to any person or Entity, other than the
Company and its Subsidiaries or Affiliates, either directly or indirectly, any trade secrets or
confidential information, knowledge or data regarding the Company or any of its Subsidiaries or
Affiliates or any of their respective officers, directors or employees including, without
limitation, the existence and terms of this Agreement, other than such information, knowledge or
data which has been released by the Company or such Subsidiaries, Affiliates or others to the
public (except as permitted in Paragraph 20 below and Section 11 of the Employment Agreement).

          14. Employee hereby grants and assigns to the Company all rights (including, without
limitation, any copyright or patent) in the results and proceeds of all services provided by
Employee. Any work in connection with such services shall be considered “work made for hire” under
the Copyright law of 1976 or any successor thereto, and the Company shall be the owner of such work
as if the Company were the author of such work. Employee will execute and deliver to the Company
any documents or instruments evidencing the Company’s ownership thereof as reasonably requested by
the Company. The provisions of this Paragraph are in addition to, and not in limitation of, any
separate agreement regarding similar matters executed by the Employee.

          15. Employee hereby expressly covenants and agrees that:

               (a) Employee shall not for a period of one year following ___, be or become an officer,
director, partner or employee of or consultant to or act in any

8

 

managerial capacity with or own any equity interest in, any Entity (an “Affiliated Person”)
which is a “Competitive Business Entity” (as such term is defined on Exhibit A hereto),
provided, however, that ownership of less than one percent of the outstanding
equity securities of any Entity listed on any national securities exchange or traded on the
National Association of Securities Dealers Automated Quotation System shall not be prohibited
hereby.

               (b) Employee will not at any time for a period of one year following                      solicit
(or assist or encourage the solicitation of) any employee of the Company or any of its Subsidiaries
or Affiliates to work for Employee or for any person or Entity in which Employee owns or expects to
own more than a one percent equity interest or for which Employee serves or expects to serve as an
Affiliated Person.

     For the purpose of this Paragraph 15(b), the term “solicit any employee” shall mean Employee’s
contacting, or providing information to others who may be expected to contact, any employee of the
Company or any of its Subsidiaries or Affiliates regarding their employment status, job
satisfaction, interest in seeking employment with Employee or any Affiliated Person or any related
matter, but shall not include general print advertising for personnel or responding to an
unsolicited request for a personal recommendation for or an evaluation of an employee of the
Company or any of its Subsidiaries or Affiliates.

          16. Documents; Conduct. (a) Employee certifies that he has returned to the Company
all property of the Company and its Subsidiaries and Affiliates in his possession or control
(whether maintained at his office, home or elsewhere), including, without limitation, all copies of
all management studies, business or strategic plans, budgets, notebooks and other printed, typed or
written materials, documents, diaries, calendars and data of or relating to the Company or its
Subsidiaries or Affiliates or their respective personnel or affairs.

9

 

     (b) Employee expressly covenants and agrees that Employee will not at any time denigrate,
ridicule or intentionally criticize the Company or any of its Subsidiaries or Affiliates or any of
their respective products, properties, employees, officers or directors, including, without
limitation, by way of news interviews, or the expression of personal views, opinions or judgments
to the news media or in any type of public forum.

          17. Employee agrees that, if called upon to do so by the Company, he/she shall truthfully
testify in Court or before an administrative agency concerning matters or disputes which arose or
were pending during his/her tenure with the Company. Employee further agrees to make
himself/herself available, upon reasonable notice and at reasonable times, to be interviewed and to
cooperate, at the request of the Company, or its counsel, in connection with any litigation,
proceeding, inquiry or investigation to which the Company is or may become involved. The Company
agrees that if it should call upon Employee to so testify or to be interviewed or cooperate, the
Company shall reimburse Employee for expenses reasonably and necessarily incurred by Employee for
testifying, being interviewed or cooperating, excluding costs and fees of any attorney whom
Employee may wish to retain to represent him/her. Further, in the event Employee is called upon to
testify, be interviewed or cooperate, the Company shall make available to Employee all books,
documents and other discoverable items necessary for him/her to give complete and truthful
testimony.

          18. Employee agrees that he/she will not voluntarily assist or encourage other persons to file
complaints or claims of any kind against the Company. To that end, Employee agrees not to commence,
prosecute or participate in (except as required by law) any action or proceeding of any kind
against the Company and agrees not to assist, encourage, or provide

10

 

support for, directly or indirectly, to any other person in connection with any action or
proceeding of any kind against the Company, except as required by law.

          19. Employee agrees that he/she will not make any disclosure of any of the facts or
circumstances giving rise to any allegations he/she has made regarding the Company or any of its
employees, regarding any policies or practices of the Company, regarding his/her disagreements with
any employees of the Company, or regarding any matters that came to his/her attention during the
course of his/her employment by the Company. Employee also agrees that he/she will not solicit or
initiate any demand or request by others for any such disclosure of any such information.

          20. Employee agrees that he/she will not disclose the financial terms of this Agreement to any
person, firm, corporation or other entity, except that Employee may disclose the financial terms to
federal or state tax authorities, his/her attorneys, accountants, or family and, subject to the
condition precedent that he deliver to the Company upon request a confidentiality agreement in
customary form, if he/she is applying for credit, to the lenders involved. Notwithstanding the
foregoing, if Employee shall be requested or required in a judicial, administrative or governmental
proceeding to disclose the financial terms of this Agreement (whether by way of oral questions,
interrogatories, requests for information or documents, subpoenas or similar process), Employee
will notify the Company (attention of General Counsel) as promptly as possible of such request or
requirement so that the Company may either seek an appropriate protective order or waive Employee’s
compliance with the provisions of this paragraph. If, in the absence of such protective order or
waiver, Employee is nevertheless, in the written opinion of Employee’s counsel, otherwise required
to disclose the financial terms of this Agreement to any court, government agency or tribunal or
else stand liable for contempt or

11

 

suffer other censure or penalty, Employee may disclose such financial terms to such court,
governmental agency or tribunal without liability hereunder.

          21. It is expressly understood and agreed that the payment(s) by the Company of the amounts
set forth herein is being given to Employee in return for Employee’s agreements and covenants
contained in this Agreement. Neither payment by the Company of the amounts set forth herein nor any
term or condition contained in this Agreement shall be construed by either party at any time as an
admission of liability or wrongdoing in any manner whatsoever.

          22. Employee agrees and acknowledges that in executing and delivering this Agreement, (a)
he/she has done so freely and voluntarily; (b) that he/she was advised in this writing to consult
with an attorney of his/her choice; (c) that he/she has had a reasonable opportunity to confer with
legal counsel of his/her own choosing; (d) that he/she executed this Agreement with knowledge of
all the material facts, and not as a result of any duress, concealment, fraud, or undue influence;
(e) that he/she was advised that he/she would have at least [twenty-one or forty-five] days to
consider this Agreement; (f) that it would become fully enforceable unless he/she revoked it in
writing directed to the General Counsel of the Company within seven days of executing it; and (g)
he/she will not receive any of the consideration provided for under this Agreement if he/she does
not execute it or if he/she revokes it within the revocation period.

          23. In the event that any provision of this Agreement is found or deemed to be illegal or
otherwise invalid and unenforceable, whether in whole or in part, such invalidity shall not affect
the enforceability of the remaining terms hereunder.

          24. This Agreement contains the entire understanding of the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous

12

 

understandings between the parties hereto with regard to such subject matter (provided that
provisions of the Employment Agreement that survive termination and which are not in conflict with
the terms hereof shall continue to survive and be in effect regardless of this Agreement). This
Agreement shall be governed by and construed and enforced in accordance with the laws of the State
of New York applicable to contracts made and to be performed therein. The terms of the Agreement
may not be modified, except in writing and signed by the party against whom the enforcement of any
such modification may be sought.

          25. The parties understand and agree that this Agreement is solely for the purposes set forth
herein, and does not constitute, and is not intended to constitute, a general policy of the Company
in dealing with employee separations.

          26. All notices, consents, requests, instructions and other communications provided for herein
shall be validly given, made or served if in writing and delivered personally or sent by registered
or certified mail, postage prepaid to:

	 	 	 	 	 
	Employee at:
	 	 	 	 
	 

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	 

	 	 
	Company at:

	 	Time Warner Cable	 	 
	 

	 	Attention: General Counsel	 	 
	 

	 	290 Harbor Drive	 	 
	 

	 	Stamford, Connecticut 06902	 	 
	 
	 	 	 	 
	 

	 	Attention: Beth Wann	 	 
	 

	 	160 Inverness Drive West	 	 
	 

	 	Englewood, Colorado 80112	 	 

          27. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall constitute one and the same
instrument.

13

 

          28. Breach by Employee. Employee hereby expressly covenants and agrees that the
Company will suffer irreparable damage in the event any provisions of Paragraphs 13, 14 or 15 are
not performed or are otherwise breached and that the Company shall be entitled as a matter of right
to an injunction or injunctions and other relief to prevent a breach or violation by Employee and
to secure its enforcement of Paragraphs 13, 14 and/or 15. Resort to such equitable relief, however,
shall not constitute a waiver of any other rights or remedies which the Company may have.

          29. Resolution of Disputes. Except as provided for in Paragraph 28 above, the Company
and the Employee agree that any claim, dispute, controversy or the like (collectively, the
“Dispute”) arising out of or relating to this Agreement (including the Exhibit annexed hereto),
including, without limitation, its validity or a breach thereof, shall be resolved by binding
arbitration in accordance with the rules of the Commercial Tribunal of the American Arbitration
Association (“AAA”). The Company and Employee expressly waive their rights, if any, to a trial of
any such Disputes by a jury. The Company and Employee agree that (a) any Dispute shall be
arbitrated by three neutral arbitrators who shall issue a written opinion and award, (b) the award
may be vacated in the event of bias, corruption, fraud or where an arbitrator exceeds his/her
powers, and (c) judgment upon the award may be entered in any court having jurisdiction thereof.
Employee may choose to have the arbitration hearing take place in either Stamford, Connecticut, or
New York City, New York. The Company agrees that if the Employee is the prevailing party in such
arbitration, the Company shall pay the arbitrators’ fees and related AAA administrative costs.

          30. Unless earlier revoked, this Agreement shall be effective on the eighth day following its
execution by the Employee.

14

 

          31. Capitalized terms used but not defined herein are used as defined in the Employment
Agreement.

15

 

          IN WITNESS HEREOF, the parties hereto have executed this Agreement, effective as of the date
first above written.

	 	 	 	 	 
	 	 	TIME WARNER CABLE, a division of
	 	 	TIME WARNER ENTERTAINMENT COMPANY, L.P.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	EMPLOYEE
	 
	 	 	 	 
	 	 	 

EMPLOYEE NOTARY

	 	 	 	 	 	 	 
	STATE OF

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.:
	COUNTY OF

	 	 	)	 	 	 

          On this                     
day of           
                    , before me personally came                                         ,
to me known and known to me to be the person described herein and who executed the foregoing
Separation Agreement and General Release, and he/she duly acknowledged to me that he/she executed
the same.

	 	 	 
	 

	 	 
	 

	 	Notary Public
	 
	 	 
	 

	 	My Commission Expires:                                         

16

 

Exhibit D

“Competitive Business Entity” shall mean (A) any Entity which is engaged in the United States,
either directly or indirectly, in the ownership, operation or management of (i) any cable
television system, open video system, direct broadcast system (DBS), SMATV system, pay-per-view
system, multi-point distribution system (MDS or MMDS) or other multichannel television programming
system (collectively “Systems”) in the United States; or (ii) any business of providing any local
residential telecommunications, or any internet access or any other transport or network services
for Internet Protocol based information; and (B) any federal, state or local authority empowered to
grant, renew, modify or amend, or review the grant, renewal, modification or amendment of, or the
regulation of, franchises to operate any System. Provided, however, that
“Competitive Business Entity” shall not mean any cable television system operator which, at all
times during the relevant period, has less than 500,000 subscribers and does not serve any area
which is also served by a cable television system owned, operated or managed by the Company or its
Affiliates.

All capitalized terms used herein shall have the meanings provided in the Amended and Restated
Employment and Termination Agreement to which this Exhibit D is attached.

17EX-10.45 MEMORANDUM OPINION AND ORDER BY F.C.C.

 

					
	 
	 	 	 	Exhibit 10.45
	 
	 	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
	 	)	 	MB Docket No. 05-192
	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

			
	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	 

 

 

					
	 
	 	Federal Communications Commission
	 	FCC 06-105

	 	 	 	 	 
	Heading	 	Paragraph #	 
	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 Adelphia’s Systems
	 	 	246	 
	2. Clustering of Comcast and Time Warner Systems
	 	 	264	 
	3. Resolution of Bankruptcy Proceeding
	 	 	278	 
	4. Unwinding of Comcast’s 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	 

2

 

					
	 
	 	Federal Communications Commission
	 	FCC 06-105

	 	 	 	 	 
	Heading	 	Paragraph #	 
	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 transactions5 that would result in (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 Comcast’s 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 Commission’s remanded cable horizontal and vertical ownership limits.

 

			
	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 Adelphia’s
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.
Mary’s, 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.

3

 

					
	 
	 	Federal Communications Commission
	 	FCC 06-105

     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 Comcast’s 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 Adelphia’s 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 Adelphia’s systems and the system swaps between Comcast and
Time Warner Cable, which would produce cost-saving operational, infrastructure, and marketing
efficiencies; (3) Adelphia’s emergence from bankruptcy and settlement of creditor claims; and (4)
dissolution of Comcast’s interests in TWE and Time Warner Cable consistent with the Commission’s
divestiture order.11 The Applicants further state that the improved regional coverage
of each company’s cable operations would provide the scale and scope

 

			
	6	 	Pursuant to the terms of the
Commission’s 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 Adelphia’s 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 Commission’s review of the applications
includes an assessment of whether the proposed transactions comply with specific provisions of the
Communications Act, other statutes, and the Commission’s 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 Commission’s 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 Adelphia’s 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 services20 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 Adelphia’s board of directors approved
the reorganization plan, and bidding for the company’s 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 nation’s 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	 	Adelphia’s 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 Adelphia’s 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. Adelphia’s 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. Adelphia’s 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
Comcast’s 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 Comcast’s 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.
Comcast’s cable telephony and CBC’s 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	 	Comcast’s 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 nation’s 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
men’s 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&v
key=news_mlb&text=.jsp&c_id=mlb (last visited June 19, 2006).
	 
	33	 	Comcast’s 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 Warner’s 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 Warner’s 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 Warner’s 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 Warner’s 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 subscriber’s 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 Media’s 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 Cable’s 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, LLC48 (“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
Cable’s Class A Common Stock, which are expected to represent approximately 16% of Time Warner
Cable’s 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 Adelphia’s Form
10-K Annual Report for the year ending Dec. 31, 2004, if Adelphia’s
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 Company’s
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 Comcast’s 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
Comcast’s 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 Commission’s rules69 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 LLC’s
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 BTNC’s 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
Commission’s 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, BTNC’s
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 BTNC’s motion for extension of time. However, we accept its reply
comments and will treat them as an ex parte filing. We will address
BTNC’s 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 petitioner’s 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) NHMC’s 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 Adelphia’s 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 staff’s 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 Commission’s 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, FTC’s 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 Commission’s 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 Commission’s 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
transaction’s effect on future competition.94 The Commission’s 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 Commission’s 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 Commission’s 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. Nat’l 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
station’s 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 Commission’s 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 Commission’s jurisdiction to
conduct a public interest review of the transactions is “tenuous.”103 Applicants state
that the Commission’s 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 Commission’s 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 Commission’s 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 Adelphia’s 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 Commission’s public interest standard are a matter for the Commission’s 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 system’s 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 18th 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
Commission’s 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 Commission’s articulation of its public
interest standard is not immutable. As the D.C. Circuit has recognized,
“an agency’s 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
Commission’s 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 Adelphia’s reorganization plan. On May 26,
2006, Adelphia filed a motion seeking the bankruptcy court’s 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 Adelphia’s 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 programming124 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 nation’s 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 Commission’s 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 Commission’s
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
Commission’s 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 operator’s 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 court’s remand, the Commission issued a Further Notice of Proposed
Rulemaking to address how to revise the limits in compliance with the court’s
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 vendor150 in which
a cable operator has an attributable interest, or a satellite broadcast programming
vendor151 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
Commission’s voluntary stay of enforcement of the cable ownership limit
“ended automatically” upon the reversal of the District
Court’s 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 court’s determination
of the limit’s 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
Commission’s Horizontal and Vertical Ownership Limits, 16 FCC Rcd 17312
(2001) (“Cable Ownership Further Notice”).
	 
	146	 	The Commission’s 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 cable’s 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 MVPD’s
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 MVPD’s lineup
would have a substantial impact).”165 The Commission found that an MVPD’s 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 Commission’s 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
Commission’s 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. Comcast’s 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 Comcast’s 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 Commission’s 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
Comcast’s 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 Commission’s 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 nation’s 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 Commission’s 30% limit.

     48. Various parties question Comcast’s subscriber figures or assert that its post-transaction
reach will exceed the cable ownership limit. None of the parties, however, presents persuasive
evidence that Comcast’s 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 nation’s cable
subscribers.190 For purposes of compliance with section 76.503, however, the relevant
measure is a cable operator’s 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 Warner’s 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
Commission’s 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 Warner’s 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
Warner’s 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 Warner’s systems should be attributed to Comcast or Comcast’s 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 Warner’s and Comcast’s 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 Comcast’s 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, Comcast’s 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 Comcast’s post-transaction national subscribership are based on data
the Applicants provided at the system level for June 2005. Our calculations comport with Comcast’s
post-transaction estimate of approximately 26,780,352 attributable subscribers.198 We
accept Comcast’s 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 Kagan’s estimate for the time period during which
Comcast’s 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	 	Comcast’s 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 Comcast’s total, but for purposes of calculating
Comcast’s 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 Commission’s 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 Commission’s 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, Comcast’s
post-transaction total would be 26,932,586 attributable subscribers. Using
this post-transaction total of 26,932,586 attributable subscribers and
Kagan’s estimate that there were 94.2 million MVPD subscribers as of
December 2005, Comcast’s 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
Commission’s 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 Commission’s 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 Commission’s 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 LEC’s
telephone service area.214 Section 76.505(e) defines a LEC’s “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 Commission’s rules.216

     58. Section 76.505(b) of the Commission’s 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 operator’s 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
Commission’s 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 — It’s
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 Commission’s
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 Commission’s 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 (5th 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-à-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 country’s 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 Press’s 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 market’s 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 Applicant’s 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 Warner’s or Comcast’s 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).
	 
	 	 	291See 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 MVPD’s enhanced ability to obstruct competition from
overbuilders.296 CFA/CU and CWA/IBEW rely on HHI analyses to contend that Comcast’s and
Time Warner’s 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 company’s Senior Vice President of
Investments stating that (1) Time Warner has a solid investment grade rating
from the nation’s three leading credit rating agencies and is expected to
maintain an investment grade rating after the transactions; (2) the report
mischaracterizes the company’s 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 CWA’s 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 Comcast’s and Time Warner’s 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/CU’s contention. Nor are we
persuaded by CFA/CU’s or CWA/IBEW’s 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 Comcast’s 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 Comcast’s proposed
acquisition of Time Warner’s 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 Warner’s 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, Comcast’s
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 20th Jud. Cir. of Florida) (filed Jan. 12,
2004) (later removed to the U.S. District
	 
	 	 	(continued....)

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     88. Similarly, RCN alleges that Comcast employs predatory pricing practices by offering deep
discounts either to inhibit RCN’s 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 Comcast’s 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
MIC’s and RCN’s claims. The Applicants state that MIC’s allegations arise under provisions of
Florida’s antitrust laws and that they will be adjudicated in a Florida court of competent
jurisdiction.314 The Applicants dispute the merits of MIC’s 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 RCN’s 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 Comcast’s motions for summary judgment with respect to
MIC’s claims of predatory pricing and with respect to two of MIC’s
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
Commission’s 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 incumbent’s
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 Commission’s 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
 MIC’s 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 MIC’s
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 Comcast’s 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 Adelphia’s commitments
to LFAs, they may not fulfill them.336 NATOA provides several examples of Comcast’s
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 operator’s 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 operator’s 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 LFA’s transfer approval,
or the Commission’s approval should be actionable immediately in federal court, and evidence of
failure to comply with the Commission’s 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 Commission’s 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 LFA’s 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 Comcast’s and
Time Warner’s 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 firm’s
actions cause harm if they lead to the inefficient production and/or
distribution of goods. If a firm’s exercise of market power does not
change the quantity of output purchased, then the production and distribution
of goods has not changed, and the firm’s 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 Adelphia’s subscribers and
expedite the resolution of Adelphia’s 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 Comcast’s and Time Warner’s 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 Comcast’s and Time Warner’s 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 TAC355 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 political361 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 Comcast’s platform. EchoStar Comments at 12.
	 
	354	 	CWA/IBEW Petition at 18-19 (citing comments
filed by various programmers in the Commission’s 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
network’s long-term viability, other MVPDs are reluctant to carry a network that is not already
carried by Comcast and Time Warner.366 BTNC’s arguments are similar to TAC’s. 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 Comcast’s 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
court’s remand of the Commission’s 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 TAC’s 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 Warner’s 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 FCC’s existing program access rules. Id. It
appears, however, that TAC is referring to the Commission’s 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 TAC’s inability to obtain carriage
commitments.383 Applicants further dispute TAC’s assertions that the Applicants’
post-transaction subscribership in the top DMAs will result in harms.384 Regarding
TAC’s 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
Commission’s 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 Commission’s 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 CWA’s 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 Comcast’s 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 programmer’s 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 Commission’s 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 Adelphia’s
subscribers and the timely resolution of Adelphia’s 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 Florida’s 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 Comcast’s 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 Comcast’s 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 Comcast’s 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 TCR’s
proposed conditions, concluding that they merely restate existing program carriage rules, are not
within the Commission’s 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 Comcast’s or Time Warner’s 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 TCR’s 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
Commission’s 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 Comcast’s and Time
Warner’s upstream programming assets with Adelphia’s downstream cable systems. The acquisitions
would expand the acquiring firms’ subscriber reach in particular downstream markets by combining
Adelphia’s cable systems with their own. Time Warner’s and Comcast’s exchange of cable systems
will further concentrate each firm’s 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
Commission’s 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
MVPD’s 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 MVPD’s 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 Commission’s 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 Commission’s 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 operator’s 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 firm’s programming and do not immediately switch back to the
competitor’s 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 MVPD’s 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 team’s 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 team’s
territories, and RSNs often are distributed to consumers located outside a particular team’s
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 team’s 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 DIRECTV’s 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 MVPD’s 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 Milwaukee’s 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 team’s games are not available in
the other’s 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 MVPD’s smaller, individual service areas
within the RSN footprint, we were able to assess the transaction’s impact in areas where all
viewers are receiving similar RSN programming.427 Although DIRECTV’s (and EchoStar’s)
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
DIRECTV’s 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 Comcast’s 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
SportsNet’s 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=1256702400&adxnnl=1&partner=rssnyt&adxnnlx=1114171725-Wd0IQX
YBoPpsUIuzdiiGQg (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
Warner’s Turner Broadcasting System, Inc. Turner South has long-term
broadcast rights to the MLB’s Atlanta Braves, the NHL’s Atlanta
Thrashers, and the NBA’s 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&v
key=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 Comcast’s and Time Warner’s 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
Comcast’s or Time Warner’s market share could make a uniform price increase strategy profitable and
thereby harm competition. According to DIRECTV, as a cable operator’s 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 operator’s 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 Broadband’s 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 “nation’s 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 RSN’s footprint.440

 

			
	 	 	(Continued form 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 Network’s 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 Broadband’s 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 Chicago’s 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 York’s 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
Commission’s 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 Comcast’s 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
DIRECTV’s 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 West’s 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 men’s 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 MVPD’s
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 Comcast’s and Time Warner’s
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 Warner’s 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-Atlantic’s 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 DIRECTV’s 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 DIRECTV’s 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
Comcast’s 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
FCC’s consideration of the transactions because (1) Comcast is not
acquiring any systems in CSN Chicago’s 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-Atlantic’s 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 DIRECTV’s 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 Comcast’s 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 nation’s 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 Commission’s 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 network’s
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 DIRECTV’s access to particular RSN programming. DIRECTV finds
that temporary foreclosure of DIRECTV’s 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 Comcast’s or Time Warner’s 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 DIRECTV’s 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 RSN’s 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
Comcast’s and Time Warner’s 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
DIRECTV’s 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 DIRECTV’s 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
RSN’s 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 RSN’s 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 MVPD’s market share significantly. The Applicants have argued that DIRECTV’s and
EchoStar’s lack of access to CSN Philadelphia has not had a significant impact on DBS market share
in Philadelphia and that DIRECTV’s estimates of the effect are fatally flawed.499 We
disagree.

     146. Evidence supports DIRECTV’s 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
Commission’s 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 Warner’s 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. EchoStar’s analysis
indicates that EchoStar’s 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 Nielsen’s
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. Comcast’s own documents indicate that Comcast, too, recognizes [REDACTED] .509 510 Thus, Comcast’s own documents suggest that [REDACTED] . Although
Comcast claims this document does not represent the company’s official position, it nevertheless
casts doubt on Comcast’s 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 RSN’s price is that
non-competing cable operators in the RSN’s 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 increase’s impact, because the higher
price the non-competing cable operator pays is offset by the higher returns gained from its share
of the RSN’s profits. Indeed, if the RSN ownership shares match each cable operator’s share of the
total subscribers that receive the RSN’s programming, then a uniform price increase will have no
impact on each cable operator’s 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
RSN’s affiliate fee means that the cable operator will pay $250,000 more
for its 250,000 subscribers. The RSN’s 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
operator’s effective cost for RSN service. The cable operator’s
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 Warner’s 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, Comcast’s 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 Warner’s 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
Warner’s 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 MCI’s 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. Nat’l 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
Comcast’s and Time Warner’s 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 Commission’s 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 Commission’s 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 Comcast’s and Time Warner’s

 

			
	 	 	(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 station’s 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 Comcast’s and Time Warner’s 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 Comcast’s and Time Warner’s 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 team’s 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 Commission’s 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. Comcast’s 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, Comcast’s 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 Comcast’s 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 Warner’s 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 Comcast’s 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 MVPD’s 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 DEMAND’s 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 carte546 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 RCN’s contention that Comcast entered into an exclusive distribution agreement with
PBS Sprout to harm RCN, PBS Sprout explains that it chose Comcast’s 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 RCN’s 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, Comcast’s distributor became the
exclusive distributor for PBS Sprout VOD programming. Id. RCN claims that
Comcast’s 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 children’s 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 children’s 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 RCN’s 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
Comcast’s and Time Warner’s local and regional networks are delivered terrestrially and therefore
are not subject to the program access rules, the record does not indicate that an MVPD’s 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. EchoStar’s

 

			
	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 DEMAND’s
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 children’s 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
MVPD’s 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 Comcast’s and Time
Warner’s subscriber reach, the transactions would increase each firm’s 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 Cablevision’s 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 Commission’s 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 Comcast’s and Time Warner’s 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 network’s 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 programmer’s 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
Charlotte’s 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-SET’s Shutdown,
Street & Smith’s 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 Warner’s 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
Warner’s claim, if true, indicates that team ownership of an RSN is not a
check on Comcast’s and Time Warner’s 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 Comcast’s 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 Warner’s actions in Charlotte or Cleveland. In
addition, Time Warner’s 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 Act’s 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 Warner’s subscribership levels
well below the Commission’s existing horizontal limits, and Comcast’s horizontal reach will be
almost equivalent to the horizontal reach the Commission approved in the Comcast-AT&T Order.
Although the Commission’s 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 Comcast’s and Time Warner’s 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
Comcast’s and Time Warner’s cable systems.584

     184. Applicants respond that they do not control the viability of independent networks. They
reject TAC’s assertion that in the present context “independent networks” should exclude networks
independently owned by other large media companies.585 They state that TAC’s 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 Commission’s 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
Warner’s 2004 Annual Report, TAC notes that Time Warner’s networks
(including broadcast network WB) contributed 40% of operating income, while its
cable division contributed only 28.6% of operating income. TAC states that
Comcast’s 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	 	TAC’s 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. 0.
	 
	585	 	Applicants’ Reply at 81.

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raised and addressed, if at all, in the Commission’s pending cable horizontal and vertical
ownership proceeding. Applicants contend that TAC’s arguments are belied by a robust programming
marketplace.586 Applicants further assert that TAC’s claims directly contradict the
court’s 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 RSN’s 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 MVPD’s decision not to carry a competing programmer’s 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 MVPD’s 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 TCR’s 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 TCR’s 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 CSN’s letter was to thwart TCR’s 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 CSN’s licensing rights to carry certain Orioles games
expire in 2006. Id. at 15.

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     187. TCR claims that Comcast’s 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
Comcast’s 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 TCR’s 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
Comcast’s decision not to carry TCR’s programming is not the product of discrimination based on
affiliation and that TCR’s real concern involves a contractual dispute regarding TCR’s right to
exhibit the Baltimore Orioles’ baseball games.600 Applicants further contend that the
market for regional programming networks is robust.601 They dispute TCR’s calculation
of post-transaction concentration, claiming that MASN’s footprint includes nearly twice as many
subscribers as TCR claims and that Comcast’s 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 Comcast’s and Time
Warner’s 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 Comcast’s 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 RSN’s 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 Comcast’s and Time Warner’s 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 arbitrator’s 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 RSN’s 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 Adelphia’s 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	 	KVMD’s 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 Commission’s 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 KVMD’s 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 Commission’s 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 Warner’s petition to remove its cable
communities in the Los Angeles DMA from the station’s 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 Comcast’s
petition to remove its cable communities in the Los Angeles DMA from the
station’s 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 industry’s
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 Bush’s
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 public’s 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 Comcast’s and Time Warner’s
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 Commission’s 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 Commission’s 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 Commission’s 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 Commission’s 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”), aff’d 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 Commission’s 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 Commission’s 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 community’s 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 Commission’s 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 “Comcast’s 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
Commission’s 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 Act651 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 Comcast’s 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 Comcast’s 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 Manager’s 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 Court’s Brand X decision654 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 Comcast’s and Time Warner’s
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. Ass’n 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
Commission’s 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 Commission’s 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 cable’s 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 Corporation’s 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 modem’s 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 Comcast’s 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 Warner’s or Comcast’s 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 Commission’s 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 Commission’s view that
Time Warner might leverage AOL’s 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
Warner’s systems for the purpose of offering service to Time Warner’s 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 Commission’s 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 (5th 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 Commission’s
AOL-Time Warner non-discrimination condition continues to apply to Time
Warner’s 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 Statement’s 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 Adelphia’s interest in ICTV, a privately-held interactive TV software
provider.690 Pursuant to the transactions, Comcast would acquire Adelphia’s 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 Warner’s 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 Comcast’s financial interests in entities that develop consumer equipment, EPG, and
ITV software present a transaction-specific harm. Specifically, Comcast’s acquisition of
Adelphia’s 2.11% interest in Sedna represents only a modest increase in Comcast’s 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 Comcast’s
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 Commission’s Equal Employment Opportunity (EEO)
Rules.706 Applicants reject the claim that Comcast’s employment of Hispanics lags when
compared to national statistics.707 Applicants assert that

 

			
	701	 	The Applicants have made similar
representations regarding ICTV’s 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 Comcast’s 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
Comcast’s business units, which is charged with setting tangible goals to
achieve the company’s 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 Comcast’s purchase in 2002 of AT&T Broadband).
According to the Commission’s most recent statistics compiled in its 1999
Cable Employment Trend
	 
	 	 	(continued....)

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imposition of quarterly reporting conditions to monitor Comcast’s minority recruiting efforts
would be unreasonable and unnecessary.708 Finally, Applicants assert that Comcast is
complying with all of the Commission’s 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 Commission’s
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 Comcast’s
compliance with the Commission’s cable EEO outreach rules. The petition to deny presents no
specific evidence regarding Comcast’s 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 Commission’s 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
Commission’s 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 Commission’s 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 Comcast’s
outreach and recruiting efforts.714 Thus, we deny NHMC’s 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 Comcast’s 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 Comcast’s 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&T’s 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 Comcast’s 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 Comcast’s 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 Comcast’s 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 TCR’s 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 CWA’s assertions, made in ex parte presentations to Commission
staff, are unfounded. Specifically, the Applicants deny CWA’s 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 CWA’s 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
Commission’s 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 Commission’s 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 Commission’s 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
	 
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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 Comcast’s and Time Warner’s 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 CWA’s and
Comcast’s 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 Comcast’s alleged refusal to carry TCR’s regional sports networks. The Media Bureau
will address TCR’s 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 Adelphia’s bankruptcy proceedings; and
(4) the unwinding of Comcast’s 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
Commission’s 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 CWA’s 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 Adelphia’s bankruptcy proceedings. Finally, we conclude that the
unwinding of Comcast’s 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 firm’s 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 Adelphia’s Systems

     246. Comcast and Time Warner claim that they would upgrade Adelphia’s 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 Adelphia’s 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 Comcast’s, Time Warner’s, and Adelphia’s cable systems, penetration
rates, and services in order to demonstrate Adelphia’s 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
Adelphia’s 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.
Adelphia’s basic service tier penetration rate fell to 47.1% from 50.5%
in 2003. Of its basic service subscribers, 38.3% also subscribe to
Adelphia’s 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
	 
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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, Adelphia’s basic cable penetration rate of
48.1% lags behind Comcast’s 52.6% and Time Warner’s 56.7% penetration rates.757
Applicants state that only 2.8% of Adelphia’s basic tier subscribers subscribe to HDTV service,
while 6.7% of Comcast’s and 5.3% of Time Warner’s basic tier subscribers subscribe to HDTV
service.758 According to Applicants, Adelphia has 126,000 DVR subscribers compared to
Comcast’s 575,000 and Time Warner’s 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. Comcast’s and Time Warner’s 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

 

			
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	 	 	comparison, over 40% of Comcast’s and over 45% of Time
Warner’s 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 Adelphia’s cable
systems.
	 
	759	 	These statistics indicate that 2.5% of
Adelphia’s subscribers purchase DVR service, while 2.6% of
Comcast’s and 7.6% of Time Warner’s 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 Adelphia’s 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
	 
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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 Adelphia’s 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, Comcast’s
penetration is 18.3%, and Time Warner’s 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 Warner’s 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. Comcast’s 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

 

			
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	 	 	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 Adelphia’s systems. Comcast also
intends to invest [REDACTED] for its digital Simulcast roll-out. Most of the
capital expenditure, however, would be for Comcast’s purchase of digital
set-top
	 
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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 Adelphia’s
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 Comcast’s standards.775

     253. The Applicants claim that some of Adelphia’s 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 Warner’s 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 Adelphia’s 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 Adelphia’s systems.779

     254. Commenting in support of the Application, many non-profit organizations echo predictions
that Applicants would offer new and better services to Adelphia’s 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 Adelphia’s subscribers are
transaction-specific, because they could be achieved by any of the parties who bid in the
bankruptcy court’s 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 DIRECTV’s 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 Adelphia’s systems and that Adelphia subscribers will benefit
from the transactions in this regard. Comcast’s and Time Warner’s 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 Adelphia’s 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
Warner’s 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 DIRECTV’s 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
Adelphia’s 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 Adelphia’s systems. Nor do
Applicants explain how their high-speed Internet service is superior to Adelphia’s. 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, Adelphia’s
current high-speed Internet offerings appear to be comparable to Time Warner’s and
Comcast’s.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 system’s 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	 	Adelphia’s 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 Adelphia’s
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 customer’s 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 DIRECTV’s 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. DIRECTV’s 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
Adelphia’s 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 DIRECTV’s 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 Comcast’s and Time
Warner’s 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 Commission’s 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 CWA’s 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 industry’s 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 Comcast’s and Time Warner’s
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, DIRECTV’s 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 DIRECTV’s 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 DIRECTV’s
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 DIRECTV’s
analysis suggests a positive relationship between cluster size and penetration
rates for Time Warner’s 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 Warner’s 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 Commission’s] 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 Commission’s 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 Comcast’s national
subscriber base is not increasing, and Time Warner’s 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 firm’s 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 customer’s 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 Verizon’s 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&T’s 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 Commission’s 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 DIRECTV’s 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 Adelphia’s 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 laws850 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
Adelphia’s 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 Adelphia’s 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 Commission’s obligation to consider the national policies underlying the
bankruptcy laws does not supersede the Commission’s duty under section 310(d) to ensure that the
transactions serve the “public interest, convenience and necessity.”860 DIRECTV notes
that the bankruptcy court’s 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 Commission’s public interest
analysis.862 And, they emphatically dispute DIRECTV’s 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 Commission’s 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 Adelphia’s 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 debtor’s 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
Commission’s Section 310(d) public interest analysis”);
DIRECTV’s 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
provider’s 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(continued....)

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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 Adelphia’s 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 Adelphia’s 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 Adelphia’s 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 world’s 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, Int’l 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 debtor’s assets or if these transactions were the only way to resolve Adelphia’s
bankruptcy proceeding.

	 	4.	 	Unwinding of Comcast’s Interests in Time Warner Cable and Time Warner
Entertainment, L.P.

     287. Prior to Comcast’s 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 Comcast’s 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 Comcast’s 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 Comcast’s divestiture, or more appropriately, the
trustee’s 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 RSN’s 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 Comcast’s and Time
Warner’s 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 Commission’s program access rules with respect to
Comcast’s and Time Warner’s affiliated RSNs, regardless of the means of delivery.

     298. In addition, we conclude that the transactions will increase Comcast’s and Time Warner’s
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 Comcast’s 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 Adelphia’s 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 licenses891 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
franchisee’s 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 city’s 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 Commission’s 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 Commission’s 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 Adelphia’s 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
General’s 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 Commission’s review of
then-proposed applications for the transfer of Susquehanna Cable Company’s (“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 Commission’s 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 Susquehanna’s 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
Susquehanna’s 226,117 subscribers in the context of our review of the Applications, including the
effect on Comcast’s 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 Commission’s 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. Comcast’s application
states that it agreed to acquire all of Susquehanna Cable Company’s
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 Commission’s 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 Pick’s
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. Comcast’s 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 Commission’s 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 Comcast’s 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
Comcast’s proposed acquisition of cable systems currently held by TWC and TWE. These acquisitions
represent substantial progress toward Comcast’s continuing effort to unwind the TWE Interest in
compliance with the Comcast-AT&T Order. Consistent with the Commission’s intent in requiring the
unwinding of the TWE Interest, Comcast’s 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 Comcast’s
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 Comcast’s 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 Commission’s
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 Commission’s 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 Commission’s rules, 47
C.F.R. § 76.504, have been satisfied.

     316. IT IS FURTHER ORDERED that Comcast’s 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
Agreement913 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 Commission’s ruling does not
address any state or local franchising requirements or authorizations necessary
to be fulfilled or obtained prior to consummation.

133

 

					
	 
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	 	FCC 06-105

309,
310(d), and 47 C.F.R. § 1.46 of the Commission’s 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 Commission’s
rules, 47 C.F.R. § 1.103.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

134

 

Exhibit 10.46

					
	 	 	 	 	 
	 
	 	Federal Communications Commission
	 	FCC 06-105

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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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.

2

 

Exhibit 10.46

					
	 	 	 	 	 
	 
	 	Federal Communications Commission
	 	FCC 06-105

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 Comcast’s and Time
Warner’s 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 Commission’s 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 MVPD’s 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 RSN’s receipt of timely notice of the MVPD’s intent to
arbitrate and before the MVPD’s 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 MVPD’s formal demand for arbitration, which shall include the MVPD’s “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 MVPD’s 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 MVPD’s 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.

2

 

					
	 	 	 	 	 
	 
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	 	FCC 06-105

     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 RSN’s 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 party’s conduct, during the course of the arbitration,
has been unreasonable, the arbitrator may assess all or a portion of the other party’s 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 arbitrator’s 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 arbitrator’s 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 Comcast’s interests in Time Warner and
TWE. See Order at para. 1.

3

 

					
	 	 	 	 	 
	 
	 	Federal Communications Commission
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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 arbitrator’s 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 arbitrator’s 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 arbitrator’s award,
shall be filed with the Secretary’s 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 Administration’s approval, for
purposes of rate regulation. See 47 C.F.R. § 76.901(e).

4

 

					
	 
	 	Federal Communications Commission
	 	FCC 06-105

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 party’s conduct, during
the course of the arbitration, has been unreasonable, the arbitrator may assess all or a portion of
the other party’s 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 arbitrator’s 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 arbitrator’s decision by the Commission.

 

 

					
	 
	 	Federal Communications Commission
	 	FCC 06-105

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 strategy’s profitability. The model indicates that one of the most important
elements is consumer response to an MVPD’s 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 Commission’s rules.
However, a model is available, furnished by Lexecon, on behalf of DIRECTV. Lexecon’s 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 MVPD’s 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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	 	FCC 06-105

competing MVPD to carry it, the other unintegrated MVPDs will also carry the video
programming. If the price of the video programming is so high that the competing MVPD will not
carry it, then we assume that the price will also be too high for other unintegrated MVPDs. Since
the price of the video programming does not influence the carriage decision of the Applicant’s
MVPD, which is integrated with the video programming, we assume that the programming will always be
carried by the Applicants.

     6. Formally, the profits earned by the competing MVPD that carries the programming is equal to
s ++ ž N ž (p - P0) , where s ++ is the share of households purchasing service from the competing MVPD if all the MVPDs
serving the market carry the programming; N is the number of households in the market;
P0 is the per subscriber price of the video programming at issue; and p is the profit
the competing MVPD earns on an additional subscriber, excluding the price of the programming at
issue.

     7. The expression that represents the profits that the competing MVPD would earn if it did not
carry the programming is more complex. We need to take into account that the other MVPDs’ carriage
decisions will depend on whether they are integrated with the programming network at issue. First,
we consider the profits that would be earned in the portions of the market served by the competing
MVPD and other unintegrated MVPDs. Since we have assumed that the other unintegrated MVPDs have
the same willingness to pay as the competing MVPD, they will make the same carriage decision and,
therefore they will also refuse to carry the programming. The profits the competing MVPD earns in
areas of the market served by unintegrated MVPDs equals s -- ž N0U ž p, where s -- is the share of households
purchasing service from the competing MVPD if all MVPDs serving this portion of the market do not
carry the programming, and NI0  is the number of households in the portion of the market that is served
by unintegrated MVPDs. The profits the competing MVPD earns in areas of the market served by the
Applicant is equal to s +- ž N0I ž p , where s +- is the share of households purchasing service from the competing
MVPD if the competing MVPD does not carry the programming but the MVPD serving this portion of the
market carries the programming, and NI0   is the number of households in the portion of the market the
Applicants serve. These two terms can then be combined to obtain the total profits that the
competing MVPD would earn if it does not carry the programming at issue: s -- ž N0U ž p + s +- ž N0I ž p. The maximum willingness
to pay is:

					
	 
	 	
	 	(1)

This is the price that equalizes the profits of the competing carrier when it carries the
programming and the profits earned when it does not carry the programming.3

     8. We further modify this result by introducing the concept of bargaining power. It may not
be possible for the Applicant’s programming network to extract fully from the competing MVPD all of
its additional profits earned from carrying the network. Therefore, we introduce a parameter for
the bargaining power of the programmer,  g 0, that lies between 0 and 1. DIRECTV’s
analysis implicitly assumes that  g 0 is equal to 1 and that the programmer can obtain a
price equal to the MVPD’s maximum willingness to pay. We allow for cases where this may not be
true. Therefore the price that will be paid by the competing MVPD for the Applicant’s programming
is:

      

					
	 
	 	
	 	(2)

 

			
	3	 	 This result also assumes that all areas
served by the competing MVPD are also served by other MVPDs so that
..
N=N0U
+
N0I.

2

 

      

					
	 
	 	Federal Communications Commission
	 	FCC 06-105

     9. To examine the transactions’ effect on the price of programming, we need to examine which
of the elements in equation (2) might change due to the transactions. The number of households in
the portion of the market that is served by the Applicant’s cable operations, NI0, will change in
those markets affected by the transactions. We will use NI1 as the post-transaction value for the
number of households in the portion of the market the Applicant serves. In addition, the level of
bargaining power may change. We will use g1 to represent the bargaining power of the
Applicant’s programming network after the transactions. We do not believe the reactions of
consumers, measured by the s terms, are likely to change due to the transactions. Nor are the per
subscriber profits, net of the cost of the programming at issue (p), likely to change due to the
transactions. Therefore, the price of the Applicant’s programming at issue following the
transactions will be:

					
	 
	 	
	 	(3)

     10. Equations (2) and (3) can be combined to obtain the predicted increase in the price of the
Applicant’s programming due to the transactions. The percentage increase in the price of the
affiliated video programming network is:

      

					
	 
	 	
	 	(4)

Two simplifying assumptions can be used to illustrate the underlying behavior being modeled. One
assumption is that the transactions do not influence the amount of bargaining power that the
Applicant’s video programming network possesses (i.e. g0 = g1). The second
assumes that the share of households purchasing the competing MVPD’s service is the same when
neither it nor any other MVPD available in the area carries the video programming at issue and when
the competing MVPD and any other MVPD available in the area do carry the video programming (i.e. ). s– – = s++
With these assumptions, the percentage increase in the price of the Applicant’s video programming
network becomes:

 

					
	 
	 	
	 	(5)

     11. Under these two simplifying assumptions the percentage increase in the uniform price of
the Applicant’s programming network is equal to the percentage increase in the households that are
in the area served by the Applicant’s cable systems.

II. ESTIMATING CONSUMER RESPONSES TO THE WITHHOLDING OF REGIONAL SPORTS PROGRAMMING

     12. In order to evaluate the likelihood of uniform price increases, we need information on how
consumers react when regional sports programming is not available from some of the MVPDs in a
market. The model set forth above requires estimates of the number of subscribers who will shift
in the event that highly valued sports programming is unavailable. We base our estimates of this
effect on instances in which sports programming has been withheld from MVPDs.

     13. There are three areas in the United States where regional sports programming networks are
not offered for sale to DBS operators: Charlotte, North Carolina; Philadelphia, Pennsylvania; and
San

3

 

      

					
	 
	 	Federal Communications Commission
	 	FCC 06-105
	 	 	 	 	 

Diego, California.4 We examine the fraction of television households subscribing
to DBS service in these areas and use regression analysis to compare that to the fraction
subscribing to DBS in locations where regional sports programming is available from DBS operators.

     A. Empirical Model

     14. We follow Wise and Duwadi (2005) in the specification of a model to examine DBS
penetration and the variables that affect it.5 The model estimates the impact of cable
prices, cable system characteristics, population demographics, and DBS program offerings on the
percent of television households subscribing to DBS service. Each observation in our data
corresponds to an incumbent cable system responding to the 2005 FCC Cable Price Survey.6
The survey provides information on the service rates and characteristics of the responding cable
operators’ cable systems. We use an estimate from Nielsen Media Research of the number of
households subscribing to “alternative delivery systems” in a county to construct our measure of
DBS penetration. Demographic variables are also available at the county level from the 2000
Census.

     15. We use a partial log-linear functional form where the dependent and continuous independent
variables are transformed using the natural logarithm.7 We estimate the following
equation:

LN DBS PENETRATION = B0 + B1žLN CABLE PRICE +
B2žLN CABLE CHANNELS +
B3žPHILLY + B4žSANDIEGO + B5žCHARLOTTE +
B6žKEYDMA + B7ž DBSOVERAIR +
B8ž CABLECOMP + B9žHDTV + B10žINTERNET +
B11žLN INCOME + B12žLN MULTIDWELL + B13žLN
LATITUDE + e

Where:

LN DBS PENETRATION is the log of the percent of television households subscribing to an
“alternative delivery system” in the county containing the responding cable system;

LN CABLE PRICE is the log of the recurring monthly charge for the basic tier plus the next
additional package of channels offered by the responding cable system;8

LN CABLE CHANNELS is the log of the number of cable channels offered by the responding cable
system on the basic tier plus the next additional package of channels;

PHILLY is an indicator variable taking on the value of 1 when the responding cable system is
located in the Philadelphia DMA;

SANDIEGO is an indicator variable taking on the value of 1 when the responding cable system is
located in the San Diego DMA;

 

			
	4	 	 For this purpose, we include in the
definition of “regional sports programming network” only those
regional networks that carry regular season sporting events from Major League
Baseball, the National Basketball Association, the National Football League, or
the National Hockey League.
	 
	5	 	 Andrew S. Wise and Kiran Duwadi,
Competition between Cable Television and Direct Broadcast Satellite: The
Importance of Switching Costs and Regional Sports Networks, 1 J.
Competition L. & Econ. 679 (2005).
	 
	6	 	 We eliminate observations from cable
systems that do not offer digital programming. This eliminates 22 of the 682
cable systems with complete data.
	 
	7	 	 This transformation allows the
coefficients on the continuous variables to be interpreted as elasticities.
	 
	8	 	 More than 90% of subscribers purchase at
least the first two tiers of services. In addition, most regional sports
networks are carried on one of these two tiers.

4

 

      

					
	 
	 	Federal Communications Commission
	 	FCC 06-105
	 	 	 	 	 

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.

5

 

      

					
	 
	 	Federal Communications Commission
	 	FCC 06-105
	 	 	 	 	 

	 	 	 	 	 	 	 	 	 
	 	 	Dependent Variable: LN DBS PENETRATION
	Independent Variables	 	Coefficient	 	z-statistic
	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.

6

 

      

					
	 
	 	Federal Communications Commission
	 	FCC 06-105
	 	 	 	 	 

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 Commission’s 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 Cablevision’s 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.

7

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

carry the RSN.17 Our estimates of the impact of withholding based on the
situations in San Diego and Philadelphia indicate that the share of households purchasing DBS
service is between 33% and 40% lower in those DMAs than in areas where DBS can carry regional
sports programming. We do not have any sources to estimate the impact on the market share of a DBS
operator that does not carry regional sports programming when the unintegrated cable operator also
does not carry the programming. Intuitively, we would expect the impact to be relatively minor
since subscribers would have no incentive to switch between MVPDs. However, it is possible that
there would be some impact, as some households might drop MVPD service altogether if regional
sports programming becomes unavailable. Accordingly, we adopt two estimates of this value: 0% and
2%.18

     24. Bargaining Power. The RSN’s relative bargaining power is reflected in the ã0
and ã1 terms in equation (4). We do not have any information on the relative bargaining
power of the parties; however, as long as the transactions do not change the amount of bargaining
power, the relative increase in RSN affiliation fees is not influenced by the amount of bargaining
power. As equations (2) and (3) indicate, bargaining power does influence the absolute price
level. Throughout our analysis, we adopt a standard solution to bargaining games by assuming that
the parties split the gains from trade (g0 = g1 = 0.5).19

     25. Profit Margin of the Competing MVPD. The uniform price increase model requires the
per-subscriber profit margin earned by the competing MVPD in order to use equations (2) and (3) to
estimate the absolute impact of the transactions on RSN affiliation fees. No other party has
proffered an alternative value, and we adopt DIRECTV’s estimate of $23 per subscriber.20

     26. Predicting the Transactions’ Effect on RSN Affiliation Fees. Using the values developed
in the previous paragraphs, we estimate the percentage change, as a result of the transactions, in
the affiliation fee of an RSN that is owned by the largest Applicant in a DMA using equation (4).
We must make assumptions about the loss of subscribers if the MVPD chooses not to carry the RSN
that other MVPDs in the area do carry. We adopt the assumption that the MVPD’s share of
subscribers would fall by 15% over an extended period of time.21 This value is less
than the estimated effect in Philadelphia and San Diego and [REDACTED] the fraction of households
that watch Comcast’s established RSNs on a weekly basis. We examine two sets of further
assumptions to construct these estimates. The first set of assumptions relies on the simplifying
assumption that the MVPD’s market share when neither it nor a competing MVPD carries an RSN is the
same as when both MVPDs carry the RSN (s– – = s++). Under this simple assumption, the percentage change in
the affiliation fee of the RSN simplifies to equation (5). The alternative assumption accounts for
the possibility that some consumers will not purchase MVPD service when an RSN is not carried.
Specifically, we assume that 2% of current MVPD customers would not purchase MVPD service if
regional sports were not available from any of the MVPDs in the market.22

 

	 	 	 	 	 	 	 	 	 	 	 
	17

	 	This information is embodied in
	 	
	 	and
	 	
	 	in equation (4).

			
	18	 	We select 2% as the alternative
assumption based on Cablevision’s loss of 2.1% of its subscribers when it
did not offer YES.
	 
	19	 	Drew Fudenberg and Jean Tirole,
Game Theory 117 (1991).
	 
	20	 	DIRECTV Surreply, Ex. A at 13-14.

	 	 	 	 	 	 	 
	21

	 	This implies that
	 	
	 	= 0.85
	 
	 	 	 	 	 	 
	22

	 	This implies that
	 	
	 	= 0.98.

8

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

     27. There are 94 DMAs that are affected by the transactions. Under the simple assumption, the
model of uniform price increases predicts that RSN fees will increase by at least 5% in 39 of the
DMAs. When the alternative assumption is used, the model predicts increases of at least 5% in 36
DMAs. Table A-2 presents the estimated impact of the transactions in each of 39 Key
DMAs.23 In addition, we estimate the net present value of the absolute increase in
payments to an RSN using equations (2) and (3).24 Under either scenario, 15 Key DMAs
are predicted to see an increase in RSN fees of at least 5%. The net present value of the
increased payments for carriage of the RSNs in these 15 Key DMAs is [REDACTED] million under the
simple assumption and [REDACTED] million under the alternative assumption.

     28. Table A-2

	 	 	 	 	 	 	 	 	 	         	 	 	 	 	 	 	 
	 	 	Percent of Homes Passed	 	 	Estimated Change in RSN Affiliation	 
	 	 	by Largest Applicant	 	 	Fee and Net Present Value of Change	 
	 	 	Before	 	 	After	 	 	in Payments to RSN	 
	Key DMA	 	Transaction	 	 	Transaction	 	 	(s– – = s++)	 	 	(s– – 1 s++)	 
	Atlanta, GA
	 	49.6%	 	55.1%	 	
$	11.1
13.2	%
 million	 	
$	8.5
11.4	%
 million
	Baltimore, MD
	 	[REDACTED]	 	[REDACTED]	 	[REDACTED]	 	[REDACTED]
	Boston, MA
	 	85.8%	 	94.4%	 	
$	10.1
5.1	%
 million	 	
$	8.5
4.5	%
 million
	Buffalo, NY
	 	78.7%	 	95.3%	 	
$	21.2
5.0	%
 million	 	
$	17.7
4.3	%
 million
	Charlotte, NC
	 	57.6%	 	63.8%	 	
$	10.7
6.0	%
 million	 	
$	8.4
5.2	%
 million
	Chicago, IL
	 	[REDACTED]	 	[REDACTED]	 	 	0.0
—	%	 	 	0.0
—	%
	Cincinnati, OH
	 	61.9%	 	68.9%	 	
$	11.4
4.9	%
 million	 	
$	9.1
4.2	%
 million
	Cleveland, OH
	 	44.2%	 	77.8%	 	
$	75.9
32.3	%
 million	 	
$	56.3
28.0	%
 million
	Columbus, OH
	 	50.1%	 	58.4%	 	
$	16.5
6.9	%
 million	 	
$	12.6
6.0	%
 million
	Dallas, TX
	 	49.2%	 	53.8%	 	
$	9.4
11.7	%
 million	 	
$	7.2
10.1	%
 million
	Denver, CO
	 	[REDACTED]	 	[REDACTED]	 	 	0.0
—	%	 	 	0.0
—	%
	Detroit, MI
	 	[REDACTED]	 	[REDACTED]	 	 	0.0
—	%	 	 	0.0
—	%
	Green Bay, WI
	 	60.4%	 	60.4%	 	 	0.0
—	%	 	 	0.0
—	%
	Houston, TX
	 	[REDACTED]	 	[REDACTED]	 	 	0.0
—	%	 	 	0.0
—	%
	Indianapolis, IN
	 	[REDACTED]	 	[REDACTED]	 	 	0.0
—	%	 	 	0.0
—	%

 

			
	23	 	The Key DMAs are those that are 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.
	 
	24	 	We use a 10% annual discount factor for
this calculation. The Commission also used this value in News Corp.-Hughes.
News Corp.-Hughes Order, 19 FCC Rcd at 635, App. D, ¶ 4.

9

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

	 	 	 	 	 	 	 	 	 	    	 	 	 	 	 	 	 
	 	 	Percent of Homes Passed	 	 	Estimated Change in RSN Affiliation	 
	 	 	by Largest Applicant	 	 	Fee and Net Present Value of Change	 
	 	 	Before	 	 	After	 	 	in Payments to RSN	 
	Key DMA	 	Transaction	 	 	Transaction	 	 	(s– – = s++)	 	 	(s– – 1 s++)	 
	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

10

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

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
	CAR-20050524AP-08

	 	Century Cablevision Holdings, LLC (DIP)
	 	WLY-627

 

			
	1	 	Subsequent to the commencement of this
proceeding, Adelphia applied for and received authorizations for new CARS
stations, WLY-850 and WLY-851 (Martha’s 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.

 

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

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

2

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

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

3

 

 
					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

Part
25 — Satellite Communications2

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 Bureau’s routine Actions
Taken public notices and recorded in the Bureau’s 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.

4

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

	 	 	 	 	 
	File No.	 	Licensee/Registrant	 	Call Sign
	 

	 	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

5

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

	 	 	 	 	 
	File No.	 	Licensee/Registrant	 	Call Sign
	 

	 	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

6

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

	 	 	 	 	 
	File No.	 	Licensee/Registrant	 	Call Sign
	 

	 	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

7

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

	 	 	 	 	 
	File No.	 	Licensee/Registrant	 	Call Sign
	 

	 	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

8

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

	 	 	 	 	 
	File No.	 	Licensee/Registrant	 	Call Sign
	 

	 	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

9

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

	 	 	 	 	 
	File No.	 	Licensee/Registrant	 	Call Sign
	 

	 	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

10

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

	 	 	 	 	 
	File No.	 	Licensee/Registrant	 	Call Sign
	 

	 	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.

11

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

	 	 	 	 	 
	File No.	 	Licensee	 	Lead Call Sign
	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
	00024488684

	 	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/Advance-Newhouse
Partnership
	 	KUC787
	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.

12

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

“Step-Two” Transactions5

	 	 	 	 	 
	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.

13

 

					
	 
	 	
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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
	00024488686

	 	50019MGTC05
	0002165560

	 	50020MGTC05

 

			
	6	 	See supra note 4.

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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 children’s 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.

 

 

					
	 
	 	
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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 today’s 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 needn’t 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. Don’t 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 Commission’s 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 majority’s
decision glides right by this and blithely grants Comcast and Time Warner license to cluster,
consolidate and non-compete. Though the item’s language is dense and its reasoning is long, one
thing is clear: it is consumers who are stuck with the consequences.

Programming Diversity

     Today’s 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 don’t 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? Wouldn’t a Spanish language channel be “must have”?
How about local news? Children’s programming? We ought to be careful before starting down the
slippery slope of determining what is and isn’t “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.
That’s 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 don’t have to take my word for it—read yesterday’s
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 majority’s
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. It’s 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. I’ll say it again: we just
cannot afford to cede so much content control to so few media companies. It’s bad because of the
homogenized entertainment and information we are fed and it’s bad for our democracy. And what
happens if these two companies refuse to take political advertisements for issues they oppose?
It’s 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 can’t watch
our hometown team’s 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 Washington’s 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 nation’s broadband
access. FCC data show that these two industries control some 98 percent of the broadband market.
Despite this, the majority’s 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. It’s a more nuanced metric than the broadband penetration
statistics the ITU employed to peg the United States at 16th in the world in broadband
penetration this past year. On this new assessment of digital opportunity, your country and mine
is ranked 21st. Right after . . . Estonia. If we want to continue to lay claim to the
United States as the Land of Opportunity, we’d 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 majority’s 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.

4

 

					
	 
	 	
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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 Comcast’s 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 majority’s 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 doesn’t 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. It’s what we should be doing here, too. But today’s action doesn’t
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 Adelphia’s 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.

5

 

 
					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

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 Comcast’s 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
Adelphia’s 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 Commission’s
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 Adelphia’s 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 nation’s 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 Adelphia’s 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 Comcast’s interests in TWC and
TWE. Although Comcast and TWC have a preexisting obligation to unwind Comcast’s interests, their
continued financial entanglement has long been a significant concern to this Commission and many of
us

6

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

who are worried about the implications of those ties for media consolidation.

     In the final analysis, both Comcast and TWC will remain below the Commission’s defacto
thirty-percent cable ownership limits2 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 Commission’s
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 Commission’s 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 Commission’s 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 Comcast’s 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. TWC’s 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.

7

 

					
	 
	 	
Federal Communications Commission
	 	
FCC 06-105

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 nation’s largest telephone companies, less
than a year ago.

     It is a major step back to let these large media conglomerates, including two of the nation’s
largest broadband providers, grow even bigger without requiring that they comply with basic network
neutrality principles. The majority’s 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
children’s 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 Commission’s 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 nation’s
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 I’ll 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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temptation to burden the market with rules and regulations that would stifle innovation and
growth.

     I do, however, think the time has come to reenergize the cable ownership discussion at the
FCC. The Act requires us to develop meaningful protections through our rulemaking process to
ensure that the incentives created by vertical integration of cable systems with affiliated
programming do not unreasonably restrict the flow of independent programming to consumers. The
comments that have come to my attention – comments including statements like “unlawful refusal,”
“intimidation,” and “coercion” – are serious allegations. I call on the parties that have raised
these allegations to refresh the record with updated filings and to join us in a renewed dialog
about how the FCC can promote the public interest in a diversity of voices while still allowing
cable operators the freedom to make sound business decisions.

     I know that there are many people from across this country who are concerned about this
transaction. Many have filed comments and been extremely helpful in shaping the discussions
related to these transactions. I hope that they will continue to be helpful by assisting the FCC
in monitoring the implementation of this Order. The Order notes many of the ways that parties can
seek redress for the specific concerns that have been raised in this process:

	 	•	 	Victims of alleged anticompetitive pricing schemes can file complaints with the
Commission or in court.
	 
	 	•	 	Disputes between Local Franchising Authorities and cable operators can be resolved in
court or in other forums as designated by state and local law.
	 
	 	•	 	Sections 613 and 616 of the Telecommunications Act allow complaints to be raised in the
event that cable operators attempt to use their market power to limit the amount of
programming available to the public or to coerce networks into exclusive arrangements as a
condition of carriage.
	 
	 	•	 	Parties can (and should) file comments in relevant open proceedings addressing
industry-wide solutions to particular issues.
	 
	 	•	 	Parties and interested consumers should contact other officials to register concerns –
whether they be Members of Congress or other agencies such as the FTC and the Department of
Justice.

I encourage consumers and programmers and anyone else to avail themselves of those mechanisms if
they feel they have been treated unfairly by these or any other service providers out there.

     I am pleased to note that this proceeding has also led to some resolution of the issue
concerning access to PBSKids Sprout. PBS creates publicly-funded, noncommercial programming, which
makes it unique among programming providers in America. Its unique nature and inherent public
interest value should not and can not be allowed to be used by any company as leverage in
negotiations with another company that wants to provide this programming to its subscribers. By
making PBS Sprout available to other Video-on-Demand platforms, Comcast has committed to making
this important children’s programming as widely available as possible. The FCC should not be in
the business of writing contracts between private companies, and the resolution of this issue
through private rather than regulatory means recognizes the unique nature of PBS programming, but
does not impose onerous burdens on Comcast’s ability to make business decisions.

     Finally, I want to take a moment to recognize that while there are concerns and criticisms of
the cable industry that have taken a center stage in this proceeding, the parties to this
proceeding – and many others in the industry – have been good corporate citizens. These companies
dedicate considerable amounts of time, money, and energy to the communities they serve. Their
charitable endeavors have made a difference to thousands of lives. Moreover, they have, in some
cases, worked to use the power of the media to make a positive difference in people’s lives. From
educating the public on how to control the content that enters their homes to the enormously
successful Cable in the Classroom program to support for public affairs programming like C-SPAN,
these companies have worked to inform, educate,

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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 Commission’s 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 Commission’s
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 bureaucracy’s 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 FCC’s 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 season’s 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 children’s 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.

14

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