Maine Argues That Time-Warner Cable Will Have Monopoly

By Tux Turkel, Portland Press Herald, Maine

Mar. 4–The pending sale of bankrupt Adelphia Communications to Time Warner Cable will create a monopoly by giving Time Warner control of 85 percent of the state’s cable market, according to arguments of the Maine Attorney General’s office.

The resulting lack of competition likely will lead to higher prices and lower-quality service for home and business customers, the agency said. It also could slow the expansion of high-speed Internet connections in rural Maine, which would hurt economic development.

The state made the arguments this week in a letter filed at the Federal Communications Commission in Washington, D.C. Regulators there are reviewing details of the $17.6 billion sale of Adelphia, which filed for bankruptcy in 2002, to Time Warner and Comcast Corp., the nation’s two largest cable operators.

The Federal Trade Commission recently approved the sale, without conditions.

Now the FCC is determining whether the transfer of Adelphia’s communication assets to its former competitors is in the public interest. It’s not clear when the agency will complete its review, which has been under way for months.

The Attorney General’s charges were disputed Friday by Time Warner Cable of Maine.

Time Warner launched high-speed Internet service in Maine in the late 1990s, expanding into Aroostook County before the technology was installed in Boston, according to Melinda Poore, a Time Warner spokesperson. Maine subscribers will continue to benefit from investments and expanded service, such as digital telephone, she said, after the company assumes control of Adelphia’s assets.

“We believe the deal is in no way anti-competitive,” Poore said.

Other parties disagree. Some satellite companies want the FCC to impose conditions on sports-programming contracts. Public-interest groups support policies to ensure wide Internet access.

Maine’s attorney general is asking that any deal include conditions that limit Time Warner market share to no more than Adelphia’s current share of the market, which is 54 percent. The state suggests that Time Warner should divest some of the assets to other cable providers, as a way to create competition.

Francis Ackerman, an assistant attorney general, said Friday that Adelphia’s 54 percent market share is already among the highest in the country for a single cable provider. If Time Warner were to assume that entire market and add it to the company’s existing 31 percent share, it would control 85 percent of Maine’s cable market and more than 279,000 subscribers. It’s unclear how the sale might affect Comcast’s 6.4 percent market share in Maine.

“This really is a merger to a monopoly, for all intents and purposes,” Ackerman said.

Under federal law, municipalities negotiate with cable companies for local franchise agreements to serve their areas. Cable competition is hardly robust now, Ackerman acknowledged, but the existence of nearby rivals provides at least some leverage for towns to bargain for a better deal. That opportunity would all but vanish if the FCC approves the sale with no conditions, he said.

Ackerman’s view was echoed by Patrick Scully, a Portland lawyer who represents several Maine communities in cable franchise negotiations.

As the industry has consolidated, Scully said, towns have found it harder to engage in meaningful negotiations. They often deal with a national headquarters, he said, which has a standard franchise agreement and is reluctant to consider local concerns.

“A company with an 85 percent market share would make things worse,” he said. “It ends up feeling like take-it-or-leave-it.”

The letter filed by the Attorney General suggests this condition would be especially harsh in Maine, where 60 percent of the population lives in rural areas. Cable often is the only conduit to high-speed Internet access in the countryside, the state said, and companies and residents need broadband to participate in national and global markets. With little competition, a dominant cable provider won’t have incentives to expand coverage.

“Unless appropriate conditions are imposed,” the state wrote in its filing, “the contemplated transaction will substantially reduce competition; and Maine subscribers and small businesses can expect to foot the bill in higher rates and lower quality service.”

The Attorney General’s position was welcomed by Stephen Ward, Maine’s Public Advocate. The federal government has exercised so little oversight on the cable industry, he said, that it’s already on the verge of operating as a monopoly.

“I’m encouraged to see the attorney general taking that action,” Ward said.

“I hope the FCC takes it seriously.”

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