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Byline: Jim Barthold

As expected, the FCC last week gave its blessing to Comcast's takeover of AT&T Broadband. Unexpected, though, was that the 3-to-1 approval came with very few strings attached - and much less pain than the FCC inflicted on satellite provider EchoStar and its proposed merger with DirecTV several weeks ago.

The commission brushed aside a number of issues, including: open access for multiple ISPs on the merged company's high-speed network; Comcast's iron grip on sports programming in Mid-Atlantic states; accelerated rollout of high-speed data and telephone services; and any guarantee the merger would douse increasing cable subscription rates.

"It's easy to react viscerally to the combination of any two large companies, but this combination solves problems, it does not create them," said Kenneth Ferree, chief of the FCC's Media Bureau.

One of the few restrictions imposed on the merged entity, which will retain the Comcast name, is a requirement to place its Time Warner Entertainment programming and subscriber holdings - which are valued at more than $10 billion - into an untouchable trust fund and divest it over the next five years.

Michael Copps, who until last week's confirmation of Jonathon Adelstein to the FCC was the lone Democratic commissioner, opposed the merger and used his dissenting statement to point out what he called opportunities for abuse and the lack of any guaranteed rate relief.

"This consolidation should allow more than [improved corporate efficiencies] when it comes to disciplining cable rates," Copps wrote. "Rates continue to climb, undisciplined by either the cable industry or, in fact, by satellite providers, who some thought would provide an external brake on rising cable rates."

That brake was partially applied when the FCC unanimously whacked the proposed EchoStar-DirecTV merger, which at face value appears similar to the Comcast deal.

Charlie Ergen, EchoStar's chairman and CEO, disputed the FCC's reasoning during his company's third-quarter earnings call."If one of the reasons for their merger is the advance of broadband, how can that not be an advantage to our merger?" he asked. Ergen vowed to continue the merger fight but conceded that the odds of success are less likely today than three months ago.

Ferree defended the FCC's decision. "They're vastly different transactions," Ferree said, noting that the FCC determined that satellite competition in rural areas outweighed any technological benefits that EchoStar-DirecTV may deliver.

The FCC's quick approval of the Comcast deal was no surprise, said Nick Griffiths, a senior analyst with Strategy Analytics. It would have been unrealistic, he added, to attach any competition requirements in rural areas.

"If you tell Comcast they have to roll out to these rural communities, I'm sure they'd just back away from the deal anyway," Griffiths said, pointing to the costs of such a build.

Surprisingly, the FCC also dismissed the idea that increased telephony competition may result from the merger, despite the fact that both companies used it as a selling point.

"The commission was justifiably skeptical of those allegations," Ferree said.

Running voice-over-IP service over cable plant is not commercially viable now, and was not one of the "public interest" arguments that drove the merger, he said.

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