In re Applications for Consent to Assignment

• Decision Date: 21 July 2006
• Docket Number: 05-192
• Court: Federal Communications Commission Decisions
• Parties: In the Matter of Applications for Consent to the Assignment and/or Transfer of Control of Licenses Adelphia Communications Corporation, (and subsidiaries, debtors-in-possession), Assignors, to Time Warner Cable Inc. (subsidiaries), Assignees; Adelphia Communications Corporation, (and subsidiaries, debtors-in-possession), Assignors and Transferors, to Comcast Corporation (subsidiaries), Assignees and Transferees; Comcast Corporation, Transferor, to Time Warner Inc., Transferee; Time Warner Inc., Transferor, to Comcast Corporation, Transferee z-statistic File No. Licensee Call Sign File No. Licensee Call Sign File No. Licensee Call Sign File No. Licensee Call Sign File No. Licensee Call Sign File No. Licensee Call Sign File No. Licensee Call Sign File No. Licensee Call Sign File No. Licensee Call Sign File No. Licensee/Registrant Call Sign File No. Licensee Lead Call Sign File Number Licensee Lead Call Sign Assignment File Number Transfer of Control File Number

In the Matter of Applications for Consent to the Assignment and/or Transfer of Control of Licenses Adelphia Communications Corporation, (and subsidiaries, debtors-in-possession), Assignors, to Time Warner Cable Inc. (subsidiaries), Assignees; Adelphia Communications Corporation, (and subsidiaries, debtors-in-possession), Assignors and Transferors, to Comcast Corporation (subsidiaries), Assignees and Transferees; Comcast Corporation, Transferor, to Time Warner Inc., Transferee; Time Warner Inc., Transferor, to Comcast Corporation, Transferee

No. 05-192

Federal Communications Commission

July 21, 2006

Adopted: July 13, 2006

Washington, D.C. 20554

MEMORANDUM OPINION AND ORDER

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

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

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...