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In early talks with competitors and public interest groups over plans by Comcast Corp. and Time Warner Inc. to carve up Adelphia Communications Corp., federal regulators are trying to gauge whether control of popular regional sports networks will give the two cable giants too much power over the pay-television market. The Federal Trade Commission recently has questioned executives at Comcast and Time Warner, as well as critics of the plan to split Adelphia between the two companies, on just how important regional sports networks are to luring subscribers. The agency is also examining whether Comcast’s control of networks such as Comcast SportsNet Chicago and Comcast SportsNet Mid-Atlantic will hurt the competitiveness of rival satellite carriers DirecTV Group Inc. and Dish Network Inc., and of small cable “overbuilders,” such as RCN Corp. Comcast and Time Warner need both FTC and Federal Communications Commission approval to complete their $17.6 billion purchase of troubled Coudersport, Pa.-based Adelphia. Andrew Schwartzman, president of public interest law firm Media Access Project, said he and consumer advocates met with FTC attorneys as they were gearing up for their review more than a month ago, noting that agency staff “asked more questions about this issue than anything else.” DirectTV, Dish Network and RCN all have asked regulators to require that Comcast submit any disputes over access to sports channels to arbitration by an outside mediator so that rivals have a chance of carrying networks at a fair price. There is already one precedent for such an arbitration requirement. As a condition of News Corp.’s acquisition of DirecTV in 2003, the FCC required that an arbitrator resolve any programming disputes between cable operators. Regional sports networks are a critical component of any pay-TV provider because they typically have exclusive rights to a large slate of games played by local professional teams, a major enticement for subscribers. In Philadelphia, for instance, Comcast’s network carries many of the games played by the local National Basketball Association and National Hockey League teams. In fact, the market power of Comcast SportsNet Philadelphia is a key concern to rivals because the cable company has denied them any right to carry the channel by exploiting a loophole in a federal program access law. The loophole exempts cable companies from sharing any programming transmitted to local cable operators over land-based lines rather than through satellite feeds. In previous rulings the FCC has said this practice may hurt competition, but the statue prevents it from closing the loophole industrywide. In a merger review, however, either the FCC or the FTC could forbid parties to the deal from using the loophole as a condition for regulatory approval. “The FCC has already suggested that exclusive local sports deals with cable are not in public interest,” said Paul Gallant, analyst with Stanford Washington Research Group, and a former FCC attorney. “Sports is must-have programming for cable sand satellite operators, so I have to think are looking very closely at that issue in this merger.” Comcast insists that there’s no reason to impose the same conditions imposed on News Corp.’s purchase of DirecTV on the Adelphia deal. “The transactions are vastly different from News Corp.’s acquisition over DirecTV,” attorneys for the three merging companies said in a filing with the FCC. In the case of News Corp and DirecTV, the deal created an entirely new vertical industry relationship between the country’s largest satellite TV provider and the leading owner of regional sports networks. The Adelphia deal, by contrast, causes “little change in ownership levels at the national level and no material vertical effects,” the companies argued. Copyright �2005 TDD, LLC. All rights reserved.

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