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Time Warner Inc. and Comcast Corp.’s $17.6 billion carve-up of bankrupt Adelphia Communications Corp. is being dragged into broader policy debates at the Federal Communications Commission about indecency and programming options cable companies offer to consumers. FCC Chairman Kevin Martin on Thursday said he has not yet made up his mind on what conditions, if any, he may impose on the Adelphia deal, but Washington regulatory sources say he’s trying to cajole the buyers into “voluntarily” creating a family-friendly programming package to obtain expedited approval of their deal. Speaking to reporters after a speech Wednesday, Martin reaffirmed his recent suggestion that consumers would benefit if cable companies offered a so-called family tier that included wholesome options and children’s programming but not the racier or violent networks such as MTV or FX that are standard in the basic cable bundle. “I think trying to provide some consumers additional means of choice in the context of cable is something that would be best if the industry would try to address on their own,” Martin said. And Comcast and Time Warner may be responding already. An industry source said in order to address Martin’s concerns, Time Warner and Comcast are exploring whether to create such a family-programming tier. Whether the FCC and Congress should somehow rein in sex and violence on basic cable is a hot topic in the business. Because the Supreme Court has given subscription-only cable operators greater First Amendment protections than traditional free over-the-air broadcasters, cable has escaped the immediate threat of fines and license revocations used by the FCC to strong-arm TV and radio stations following Janet Jackson’s infamous breast-baring during the 2004 Super Bowl halftime show. Broadcasters, religious groups and parents’ organizations complain that cable should not have a free pass and have called for policy�makers to put some kind of restrictions on subscription TV. It’s highly unlikely the Supreme Court would permit Washington to saddle cable with broadcast-style indecency restrictions, which limit sexually charged programming and vulgar bathroom humor during daytime and prime-time hours. But Martin and others have been enticed by two alternatives: requiring that family tiers be available to customers that request them or simply selling programming on a channel-by-channel � la carte basis rather than requiring subscribers to accept an imposed lineup full of channels they never watch. Both options have been vociferously opposed by many cable-industry players, who say consumer costs will dramatically rise if programming costs are not spread across a large package of channels. Martin and key members of Congress have been considering whether to impose family-tier or � la carte requirements as standalone rules. The carve-up of bankrupt Adelphia between the country’s two largest cable operators and the need for FCC approval, however, gives the agency a rare opportunity to study both cable giants’ programming pricing data in order to judge what costs narrowed programming tiers would incur. The extent to which the FCC is burrowing into the companies’ operations came to light Dec. 5, when the FCC demanded extra information on their acquisition applications. “This information is relevant in the merger process but also has a secondary benefit in terms of educating the agency staff about a number of these programming-related issues such as � la carte,” said Andrew Lipman, partner at Swidler Berlin. “It’s within the framework of the merger but has a byproduct effect.” Time Warner spokesman Mark Harrad declined to comment, as did Comcast spokesman Tim Fitzpatrick. All this has led regulatory observers to indicate that while Martin may not explicitly require Time Warner and Comcast to offer tiered services to obtain approval of their Adelphia acquisition, he is pressing them to “voluntarily” start offering such a family-friendly programming package to obtain expedited approval of their deal. “Martin is using leverage over Time Warner and Comcast through his review of their deal to press them to offer a family package,” said a telecom lawyer familiar with the mergers. “Martin’s basically saying that if they voluntarily offer a family tier, he will feel a lot better and the merger will move along faster.” In addition to pressing Time Warner and Comcast to offer a family-friendly tier, Martin is taking advantage of the cable merger review for other policy goals as well. Martin hopes to use the data to determine whether Comcast could withhold vital programming such as its regional sports network from satellite TV providers and other rivals. Last week, Martin said that a pending study at the agency concluded that cable could sell programming � la carte in an economically feasible manner, reversing key findings in an FCC study for Congress produced by Martin’s predecessor, Michael Powell, last November. The FCC’s informal 180-day merger-review period has expired, and the cable companies have said they expect the deal to close before July. The Federal Trade Commission also is reviewing the deal for antitrust problems. Copyright �2005 TDD, LLC. All rights reserved.

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