July 13 (Bloomberg) -- Comcast Corp. and Time Warner Inc., the two biggest U.S. cable providers, won approval from the U.S. Federal Communications Commission to buy Adelphia Communications Corp. for $17.6 billion in the largest U.S. bankruptcy sale.

The 4-to-1 vote marks the deal's last major regulatory hurdle. The FCC will require the buyers to offer their regional sports programs to competitors as a condition of the sale.

FCC approval, after a year of review, paves the way for a close before a July 31 deadline that would allow the buyers to walk away. Comcast and Time Warner will divide Adelphia's 5.2 million customers, trading some assets to strengthen markets where each already has large clusters. The deal also positions Time Warner Chief Executive Officer Richard Parsons to spin off the cable unit.

``It could lead to further customer-swapping opportunities in the country,'' UBS AG analyst Aryeh Bourkoff said in a telephone interview. ``And it will likely result in a new public company in the cable industry in the form of Time Warner Cable, which could spark industry consolidation.''

Parsons said on May 3 he still plans to make at least part of Time Warner Cable public. ``Both for strategic reasons and in terms of continuing the play in cable consolidation, having a cable currency is an appropriate way to go,'' Parsons, 58, said in the company's first-quarter earnings conference call.

He called the FCC conditions on the deal ``little hiccups.''

Biggest Markets

``Overall it's good news,'' Parsons said today in an interview at investment bank Allen & Co.'s annual media and technology conference in Sun Valley, Idaho. ``The entire transaction will give us a big position in New York City, a big position in Los Angeles, the two major media markets in the country.''

Shares of New York-based Time Warner, the world's biggest media company, fell 34 cents to $16.07 at 4 p.m. in New York Stock Exchange composite trading, their lowest closing price since September 2004. They have declined 7.9 percent this year. Philadelphia-based Comcast lost 56 cents to $31.50 in Nasdaq Stock Market composite trading and has gained 22 percent this year.

Comcast, the biggest U.S. cable provider, will gain 1.7 million subscribers, bringing its total to about 23.4 million and bolstering its position in Pennsylvania and Florida. Time Warner will have a net gain of about 3.5 million, giving it 14.4 million, while extending its reach in New York and Los Angeles.

Time Warner started working on uniting its cable business with Adelphia's about eight months ago, Parsons said. He said the operations should be fully combined within ``less than a year'' in most markets.

Time Warner has about six months to spin off the cable unit, Parsons said today.

Sale Conditions

As a condition of approval, the FCC required the buyers to offer some of their regional sports networks to rivals. That's a victory for Verizon Communications Inc., which is beginning to compete against cable with its own video service. Satellite providers DirecTV Group Inc. and EchoStar Communications Corp. will also benefit. In Philadelphia, the condition applies only to Comcast rivals that now have access to its sports programming.

``This condition addresses the potential for anti- competitive behavior and facilitates the ability of parties to compete with the incumbent cable operator, to the benefit of consumers,'' FCC Chairman Kevin Martin said at today's meeting.

The FCC also relented to pressure from three Washington-area members of Congress, who sought to force Comcast into arbitration to resolve a dispute with Baltimore Orioles owner Peter Angelos over broadcasts of Washington Nationals baseball games.

FCC Vote

Democratic Commissioner Michael Copps cast today's lone dissenting vote. The panel's other Democrat, Jonathan Adelstein, said he joined the three Republicans in supporting the merger because of the conditions.

The Adelphia deal has been before the FCC since June 2005. For most of that time, the panel had a vacancy with two Democrats and two Republicans. Martin, a Republican, gained a majority on June 1, when Robert McDowell was sworn in as the fifth member.

With the deal under FCC review, legislators including Senate Commerce Committee Chairman Ted Stevens, a Republican from Alaska, pushed Comcast and Time Warner to create new family friendly programming that excluded shows that were inappropriate for children.

In response, Time Warner, Comcast and some other cable companies agreed to offer packages that don't include cable channels such as MTV, BET and USA.

U.S. Bankruptcy Judge Robert E. Gerber approved the transaction on June 28. The Federal Trade Commission approved the deal in January without imposing any conditions.

Accounting Fraud

Completion of Adelphia's sale will put to rest the 11th- biggest bankruptcy by asset size in U.S. history. Adelphia, now based in Greenwood Park, Colorado, filed for bankruptcy in June 2002 after members of the founding Rigas family revealed that they had failed to disclose more than $2 billion in borrowing.

John Rigas, who founded the company in 1952, and son Timothy, who was chief financial officer, were convicted in July 2004 of conspiracy and securities fraud. Rigas, 81, was sentenced to 20 years in federal prison. Timothy Rigas, 50, was sentenced to 15 years. Father and son are free pending appeal. Michael Rigas, 52, pleaded guilty last November of making false entries and agreed to serve 10 months under house arrest.

To contact the reporters on this story: Christopher Stern in Washington at cstern3@bloomberg.net; Molly Peterson in Washington at mpeterson9@bloomberg.net.

Last Updated: July 13, 2006 18:08 EDT