FCC Review of AT&T-Time Warner Combo Hinges on Atlanta TV Station

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By Kyle Daly and Lydia Beyoud

Oct. 21 — AT&T Inc.'s anticipated $86 billion bid to acquire Time Warner Inc. could hit a regulatory snag over a small Atlanta television station that broadcasts re-runs and old movies.

The Federal Communications Commission, which may be wary of further consolidation in the media and telecom industries, is responsible for reviewing any deal that involves the transfer of broadcast, telecom or other licenses. Time Warner's Turner Broadcasting System Inc. subsidiary holds the broadcast license for Atlanta's WPCH-TV, which is unaffiliated with any major network.

Meredith Corp. runs the day-to-day operations of the station, known as Peachtree TV, through a local marketing agreement.

An FCC merger review is triggered only when parties file an application to transfer a license. As AT&T reportedly prepares its bid for Time Warner, it will have to decide if it wants to head off an FCC review by having Time Warner sell off the station.

Companies use sales, transfers and spinoffs around larger deals in order to face friendlier regulatory review “all the time,” Bloomberg Intelligence analyst Geetha Ranganathan said in an interview.

It's too soon to say whether the FCC would look favorably on the combination of one of the nation's largest content providers with one of its largest distribution companies. If AT&T and Time Warner structure the deal to leave out Peachtree TV, they would still face an antitrust merger review, likely by the U.S. Department of Justice. Multiple telecom industry analysts told Bloomberg BNA they would expect Time Warner to dispose of the station.

Time Warner could easily spin Peachtree out into a separate, wholly independent company, Roger Entner, an analyst at Recon Analytics LLC, told Bloomberg BNA. The company could also sell the station to a third party, even if it has to do so for pennies on the dollar, he said.

“Whatever that station is worth is immaterial in relation to the volume [of the deal],” said Entner. “Their toilet paper bill is probably more than what that station is worth.”

Representatives for Time Warner and TBS didn’t immediately respond to phone and e-mail requests for comment. An AT&T spokesman declined to comment.

If AT&T goes ahead with a deal that includes Peachtree TV, the FCC could start preparing for a review before a license transfer application is filed. Frequently, the commission may begin considering how to assign a possible review project and discuss what public interest issues might be implicated in a deal, Rosemary C. Harold, a partner with Wilkinson Barker Knauer LLP in Washington, told Bloomberg BNA. However, FCC staff wouldn’t spend significant amounts of time in advance of any deal until a license transfer request “shows up on the commission’s electronic doorstep,” Harold said.

—With assistance from Tim McElgunn

To contact the reporters on this story: Kyle Daly in Washington at kdaly@bna.com; Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

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