Well Connected
Comcast Corp.

In 2006, cable industry titan Comcast Corp. and No. 2 cable provider Time Warner Inc. devoured the bankrupt Adelphia Communications Corp. and then split the spoils.

But the acquisition, valued at $17 billion, took more than a year to get past Kevin Martin's Federal Communications Commission — and came with tighter-than-expected strings attached.

Prior to the FCC's approval, Philadelphia-based Comcast reached 26.1 million cable subscribers. Its net gain from the Adelphia transaction was 680,000 subscribers, according to the FCC, putting its total reach at 26.8 million subscribers, or 29 percent of the country's entire cable market. The company's cable subscriber total includes 10 million digital cable customers. Furthering its dominance in the industry, it has 9 million high-speed Internet customers and 1.5 million digital voice customers.

The top cable providers also agreed to swap customers to consolidate market share in several key locations, a move that drew fire from critics and competitors. Comcast picked up Time Warner systems in Cape Coral, Lake City, Live Oak and St. Augustine, Fla.; Jackson, Miss.; Memphis; Minneapolis; Monroe and Shreveport, La.; and in Philadelphia. It now controls 80 percent of the cable market in its home city. Time Warner now controls 61 percent of the cable market in Los Angeles, up from 12 percent before the acquisition. Opponents of the deal said such clustering of market power raises the potential for consumer abuse.

The FCC voted 4-1 in favor of the Adelphia acquisition, with Democratic Commissioner Jonathan Adelstein joining the three-member Republican majority, although he dissented in part. Despite having concerns about the lack of any "network neutrality" provisions, Adelstein said the ruling will help ensure viewer access to competitive programming. The FCC decision effectively closed the "terrestrial loophole" that allowed cable operators to deny competitors access to regional sports and news programming. Under the agreement, Comcast and Time Warner were barred from making regional sports programming unavailable to rivals, including satellite networks.

Exempted from that provision was Comcast SportsNet in Philadelphia — one of several regional sports networks the company owns — which will continue to be off-limits to DirecTV Group Inc. and EchoStar Communications Corp. SportsNet broadcasts Philadelphia Flyers hockey, 76ers basketball and Phillies baseball games. Comcast has a majority ownership in Comcast-Spectacor, whose major holdings include the Flyers and 76ers and two multipurpose arenas in Philadelphia. Media watchdog groups nevertheless declared a partial victory with the conditions of the sale. Comcast also divested a 21 percent stake in Time Warner Cable in the acquisition. Afterward, Comcast Chairman and Chief Executive Officer Brian L. Roberts said the company was "in the strongest position in our history." In 2005, the company reported net income of $928 million on $22.3 billion in revenue.

Comcast and other cable operators are now squaring off against Verizon Communications and AT&T, which are looking to add television to their growing fiber-optic networks that already disseminate phone, broadband and wireless services. Verizon, for example, offers broadband at speeds up to 30 megabits per second. Although Comcast's maximum download speed is currently six Mbps, "we should step on the pedal to get to 100," Comcast CEO Brian Roberts said at a September 2006 policy forum.

In late 2005, Comcast partnered with wireless provider Sprint Nextel Corp. and cable companies Time Warner, Cox Enterprises and Bright House Networks to develop new products to combine cable technology and interactive features with wireless technology.

The resulting consortium, SpectrumCo, bid $2.4 billion for 137 licenses on the public wireless spectrum in an FCC auction that closed in mid-September. SpectrumCo was the third-highest bidder behind Deutsche Telekom AG and Verizon Wireless.

Comcast has been ambivalent about franchising legislation that allows phone companies to save time and money by negotiating broadcast licenses directly with states rather than individual municipalities. It has neither pushed for nor blocked the House-passed telecommunications legislation to do so.

It is also lobbying against federal "family tier" and "a la carte" bills that would give consumers the option to purchase individual channels rather than a broad tier of programming. The issues continue to garner attention from Congress and FCC Chairman Martin.

Comcast Corp. was founded in 1969 by Roberts' father Ralph J. Roberts, Daniel Aaron and Julian A. Brodsky, when the trio purchased a 1,200-subscriber cable system in Tupelo, Miss. The company went public in 1972.

Like most of today's largest cable companies, Comcast got big through acquisitions. In the 1980s, it purchased stakes in communications companies, as well as a founding investment in the QVC home shopping network. It also entered the cellular telephone business, which it sold to SBC Communications of San Antonio for $1.7 billion in 1999.

In 1995, Comcast bought a majority stake in QVC, which it later sold to Liberty Media. Microsoft invested $1 billion in Comcast in 1997.

In December 2001, AT&T Broadband agreed to sell its cable unit to Comcast for $47 billion in stock and $25 billion in assumed debt. That deal, by far the largest ever in the cable business, was completed in November 2002.

In 2004, Comcast launched a failed bid to buy Walt Disney Co. But that bid and the company's aggressive push into the digital telephone business signaled a clear change of direction for the company. In fact, its growing Internet phone service helped to boost profits in early and mid-2006.

In 2006, Comcast expanded broadband cable operations through the acquisition of Susquehanna Communications, which now operates as SusCom primarily in Maine, Mississippi, New York and Pennsylvania.

Comcast owns controlling interests in the national cable networks E! Entertainment Television, Style Network, The Golf Channel, OLN (Outdoor Life Network), the video game channel G4, and AZN Television, a station aimed at Asian-American audiences. It has a non-controlling interest in PBS KIDS Sprout, TV One and MGM, among other programming outlets.

Roberts, 46, and his father, now 86, have considerable influence over corporate decisions, controlling more than one-third of Comcast's voting stock, according to a 2006 SEC document.

— Brendan McGarry

October 2006

Sources: Associated Press, Communications Daily, Company Web site, The Deal, Federal Communications Commission reports, Hoover's online, National Journal's Technology Daily, Securities and Exchange Commission filings

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