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The Federal Communications Commission’s approval of the Comcast-AT&T Broadband merger is the clearest signal yet that American regulators have abandoned using big mergers to set public policy. The agency, led by Chairman Michael Powell, cleared the merger Nov. 13 without imposing most of the conditions consumer activists sought, including a requirement that the companies open their cable systems to rival Internet service providers. FCC media bureau chief Ken Ferree said those types of objections should be addressed as part of the agency’s rulemaking authority rather than in its consideration of license transfers. “There are concerns raised by some parties regarding ISP access,” Ferree said. “All of those are non-merger-specific concerns.” Such comments represent a stark contrast to how the FCC operated during the Clinton administration, when the agency would routinely require companies to take steps beyond those required to win approval for a license transfer. “The Powell administration does not believe in using the merger process to address non-merger-specific problems,” said David Kaut, analyst at Legg Mason Inc. in Washington. “He feels those issues should be dealt with in FCC cable and broadband concentration rulemaking that affects all the cable companies, not just AT&T Comcast.” Jeff Chester, director of the Center for Digital Democracy in Washington, said former FCC Chairman William Kennard would have factored a controversial ISP agreement between AOL Time Warner Inc. and AT&T Comcast into deciding on possible concessions. The pact gives AOL access to Comcast’s cable systems in exchange for AOL agreeing not to offer on-demand video programming. For example, Kennard would have insisted that the companies drop such restrictions, whereas Powell ignored the problem, Chester said. Robert Rini, a partner at Manatt, Phelps & Phillips in Washington, said the Clinton-era FCC had a “behavioral” approach to concessions. “The Kennard administration was more concerned about furthering a social agenda,” he said. Powell’s divergent philosophy traces to his time as a Republican commissioner at the FCC during Kennard’s tenure. “Powell generally would dissent from Kennard’s media merger access concessions, so it shouldn’t be a surprise that this decision was made,” Kaut said. Case in point: Kennard pushed through the AOL Time Warner Inc. deal in January 2001 on condition the company sell unaffiliated Internet service providers access to its cable systems. This “open access” requirement spurred Powell to dissent from that part of the decision. “I believe the majority has given in too much to their collective imaginations, rather than sound reasoning based on the record, in reaching some of the conditions on the merger,” Powell said in a statement. Even in 1999, when broadband technology was still young, Kennard pressed for commitments in the MediaOne-AT&T merger, requiring the new entity to provide access to multiple unaffiliated Internet providers in both AT&T and MediaOne markets. Powell approved the merger but expressed concern that the concessions could adversely impact the agency’s rules. The only condition on the Comcast deal is the requirement that the company place its 27 percent stake in Time Warner Entertainment in an irrevocable trust, which must be sold within the next 5 1/2 years. To Michael Copps, the lone Democratic FCC commissioner, that condition was insufficient. “There is nothing in place to preclude the merged entity from investing in other programming interests in the future,” Copps said in a statement dissenting to the agency’s decision. “The whole dynamic of the industry will pull the combined company in that direction.” Copps also voiced concern that AT&T Comcast, with 27 million subscribers, will be able to use its market power to unfairly pressure broadband service providers and programmers. Kaut said Powell will focus on such objections as part of the agency’s review of cable industry concentration. But for Mark Wahl, broadband director at the Center for a Digital Democracy, the point is moot. “This is a shell game,” he said. “Powell’s decision to direct these concentration concerns away from the deal and into rulemaking proceedings is not useful because those rulemakings are all deregulatory in nature and will give up important safeguards.” A federal rule limiting a cable company’s ownership to 30 percent of the nationwide cable and satellite market is being excluded from the blockbuster media rulemaking. The U.S. Court of Appeals overturned this rule, and the FCC is likely to eliminate it, Kaut said. Wahl said the FCC’s broadband rulemaking proceeding, likely to be completed before the end of the year, will not force cable distributors to provide access to multiple ISPs. Copyright �2002 TDD, LLC. All rights reserved.

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