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FCC OKs Comcast-AT&T Deal

The combined company will serve 27 million cable customers, or 29% of the national market.

November 14, 2002|Edmund Sanders | Times Staff Writer

WASHINGTON — Comcast Corp. got the green light Wednesday to become the nation's biggest cable operator as government regulators approved its $30-billion acquisition of AT&T Corp.'s cable television business.

In a 3-1 vote, the Federal Communications Commission ruled that the deal would not harm consumers, may stabilize cable prices and should spur the deployment of new services, such as high-speed Internet access.

Shortly after the FCC decision, the Justice Department announced it had no antitrust objections to the merger.

In approving the deal, the FCC brushed aside predictions by consumer groups, Internet service providers and television programmers that worry that the combined company will wield too much clout, potentially leading to higher cable prices.

A coalition of consumer groups said Wednesday that it planned to file suit to block the deal. But with the government approvals, the two companies are expected to close their deal in a matter of days. "We are very pleased that the FCC has favorably concluded its review of our merger," Comcast President Brian L. Roberts said.

The combined companies, to be called AT&T Comcast Corp., will serve 27 million customers in 41 states, controlling 29% of the national pay-television audience. "The benefits of this transaction are considerable," FCC Chairman Michael K. Powell said. "The potential harm's negligible."

But Michael J. Copps, the commission's sole Democrat and a frequent critic of media consolidation, opposed the deal, saying he feared it would give the company too much power over cable television programming and distribution. "That is just too much raw commercial power," Copps said.

Comcast's acquisition of the No. 1 cable operator, AT&T Broadband, brings it back to the Southern California cable market. Comcast takes over AT&T Broadband's roughly 500,000 customers in Los Angeles County and an additional 80,000 subscribers in Orange County.

Comcast, based in Philadelphia, in 1999 swapped the last of its local cable systems -- in Seal Beach, Newport Beach, Fullerton and Santa Ana -- with Adelphia Communications Corp. to concentrate on markets that it could control geographically. Los Angeles is among the few large cities that have not consolidated into the hands of a single cable operator.

The FCC's approval of the Comcast-AT&T deal comes about a month after the agency rejected a big satellite TV merger between EchoStar Communications Corp. and Hughes Electronics Corp., parent of DirecTV.

Until last year, a combination of AT&T and Comcast would have been a much harder sell. Old FCC rules prohibited any cable or satellite provider from serving more than 30% of the pay-TV market. The new AT&T Comcast will skirt the edge of that limit, and according to some estimates, may exceed it.

But a federal appeals court in Washington vacated the rule as unconstitutional, and the FCC has yet to set a new limit.

In addition to their cable systems, AT&T Comcast will have a stake in Time Warner Entertainment, a joint venture with AOL Time Warner Inc. As part of its approval, the FCC is requiring that AT&T Comcast put its Time Warner Entertainment stake into a separate trust until it can be spun off as part of a previously announced deal between AT&T and AOL Time Warner.

Comcast's shares fell 70 cents to $23.30 on Nasdaq. AT&T shares fell 39 cents to $13.47 on the New York Stock Exchange.

Times staff writer Sallie Hofmeister contributed to this report.

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