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Three cheers for Big Cable

July 17, 2006

FOR THE 1.2 MILLION ADELPHIA customers in greater Los Angeles, it's time to say hooray for media consolidation. The Federal Communications Commission has approved a plan by the two largest U.S. cable operators, Comcast and Time Warner, to split bankrupt Adelphia's assets and swap selected cable systems. When the dust settles this summer, Comcast and Time Warner will serve a larger share of the country's homes; here in Los Angeles, Time Warner will go from minor player to kingpin -- it will be the sole cable operator for about 98% of the city and 75% of the region.

So why is this good news? This is the cable industry, after all, which ratchets up prices as regularly as swallows return to San Juan Capistrano.

For starters, removing Adelphia from the local cable TV picture is addition by subtraction. Although it is currently the largest cable operator in the region, with customers from Ojai to Temecula, Adelphia has been notorious for poor customer service and sparse product offerings, particularly in the years leading up to its 2002 bankruptcy filing.

The primary benefit of Time Warner's ascendance in Southern California is that the company plans to start offering local phone service soon, giving parts of the city their first taste of local-phone competition. Many residents also will be offered cable-modem service, an alternative to the local phone companies' high-speed Internet lines, for the first time. Judging from what has happened in other communities, competition may not drive down prices significantly, but it should yield more value for the money.

Critics of the Adelphia deal complained that letting cable operators consolidate their hold over local markets would make it harder for competitors to enter those markets. They also warned that local regulators would have a tougher time protecting against abuses because they wouldn't be able to compare the local franchise with those of nearby communities.

Such complaints, however, overlook what's happened to the communications market over the last decade. With rare exceptions, cable operators haven't competed against each other. Instead, they've battled other providers, including satellite operators and, soon, telephone companies (which will be driven to compete in the cable market, whether consolidated or fragmented, by the cable operators' entry into phone service). These are regional, even national, battles, and cable operators have to consolidate locally to compete effectively. Meanwhile, one legitimate concern about the deal -- that Time Warner and Comcast would keep local sports programming out of the hands of competitors -- was addressed by the FCC with new restrictions.

Time Warner officials say they plan to support more ethnic programming, provide more programs on an on-demand basis and deliver other benefits to their L.A. customers. Those would be welcome, of course, but would be icing on the cake. The real benefit here is for Adelphia customers, who may finally get something closer to their money's worth.

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