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ACA: No Stopping Comcast-NBC Merger

While predicting that the Federal Communications Commission (FCC) will approve Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s merger with NBC Universal early next year, small cable operators are still pushing the agency to impose merger conditions that would protect them from paying stiff fees for programming from the combined company.

"We’re not trying to delay the deal. We’re trying to ensure that conditions are imposed that address the concerns of smaller cable operators and our customers in smaller markets," American Cable Association (ACA) president Matt Polka told reporters on a conference call Tuesday morning. (See ACA: Comcast-NBCU Deal Could Cost Subs $2.4B.)

Polka said he and executives from ACA members RCN Corp. , Wave Broadband , and WideOpenWest Holdings LLC (WOW) (RCN and WOW, as cable "overbuilders," compete with Comcast) were lobbying FCC commissioners this week, asking them to force Comcast and NBCU to charge "market-based rates" for programming from Comcast regional sports networks and NBCU-owned cable networks and TV stations after the merger closes.

Polka said he expects the FCC to sign off on the mega merger in January or February, but added that he didn't know which specific conditions or remedies the commission is considering placing on a combined Comcast-NBCU.

In August, ACA proposed several merger conditions, including that operators be allowed to use baseball-style arbitration to settle disputes over programming deals for networks owned by Comcast-NBCU. In that scenario, each party submits its best offer, and an arbitrator picks one of the proposals. (See Policy Watch: Critics Pound Comcast-NBCU Deal .)

Polka and executives from WideOpenWest and Wave Broadband said today that such a measure would be too expensive for smaller cable operators. In order to protect those smaller companies, the ACA said the FCC should prohibit Comcast-NBCU from charging distributors with 125,000 or less subscribers more than a market-based rate for programming.

ACA president Colleen Abdullah said WOW had considered entering baseball-style arbitration with Comcast a few years ago to settle a carriage dispute involving one of its regional sports networks, but that ACA ended up striking a deal with Comcast after realizing it could cost $1 million and take one to three years to complete the procedure.

"We ended up eating a huge, enormous increase, some if which we had to pass on to our customers," Abdullah said, insisting that such arbitration doesn't work. "It’s ineffective, and it would continue to be in the future," she added. WOW competes head to head with Comcast in Illinois and Michigan.

Wave Broadband COO Steve Friedman said baseball-style arbitration may work for larger Comcast rivals such as DirecTV Group Inc. (NYSE: DTV) and AT&T Inc. (NYSE: T), but that smaller operators can't afford the process, which he also said can cost in the neighborhood of $1 million. Friedman, who is also chairman of ACA, planned to return to the FCC Tuesday afternoon with Abdullah and Polka to lobby the commission on ACA’s proposed merger conditions and remedies.

ACA also wants its members to be able to use bargaining agents such as the National Cable Television Cooperative Inc. (NCTC) to negotiate programming deals with Comcast-NBCU, which the group hopes would give smaller cable operators the leverage enjoyed by larger MSOs.

— Steve Donohue, Special to Light Reading Cable

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