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Duke, Teco Take Debt-Rating Hits

If there is a limit to Americans' tolerance for media industry consolidation, we'll soon find out.

Wall Street applauded Comcast's (CMCSA) uninvited $54 billion bid for Disney (DIS) on Wednesday. Analysts cheered the combination of Comcast's cable properties with Disney's ABC, ESPN and other programming, saying they foresee no substantial legal or regulatory hurdles.

But how the deal plays in Washington and on Main Street may be another matter altogether. Combining the nation's largest operator of cable systems with a titan in TV broadcasting, TV programming and Hollywood could provoke a frenzy of opposition, observers say. Recall, for instance, the groundswell last year that upended the Federal Communications Commission's efforts to increase the number of broadcast television stations that a single network might own.

"This deal is highly likely to be approved by the FCC and the Justice Department," said Scott Cleland of the Precursor Group, a Washington tech consultant shop. "However, it's also likely to prompt a firestorm of objections from consumer groups and politicians worried about media concentration."

'Swollen Giant'

Those objections, in fact, have already emerged. The deal would give "too much power" to Comcast, says Jeff Chester, executive director of the Center for Digital Democracy. "Comcast is already the swollen giant."

It's a sign of Comcast's arrogance, says Chester, that the Philadelphia-based cable operator is announcing its offer for Disney on the same day of an important court hearing in Philadelphia. There, a group of major media conglomerates are seeking enactment of the FCC's relaxation of media concentration rules.

"This is a deal clearly beyond the pale of what's acceptable," says Chester. "This merger will be bitterly opposed by the hundreds of thousands of people who rose up against the FCC proposals last year."

Certainly, grand media mergers remain in style. Few executives appear to have been frightened away by 2001's disastrous merger of America Online and Time Warner (TWX), or by Vivendi Universal's (V) acquisition-induced near-bankruptcy last year.

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