FCC: AT&T Must Shed Time Warner Stake

Friday, December 22nd 2000, 12:00 am

By: News On 6

WASHINGTON (AP) â€” AT&T failed to comply with conditions attached to its summer cable merger and now must shed its stake in Time Warner Entertainment, federal regulators concluded Thursday.

The decision by the Federal Communications Commission comes after days of back-and-forth between the government and the nation's largest cable company over how AT&T can comply with federal limits on the reach a cable company can have.

Unsatisfied with AT&T's proposal for coming under this cap, the FCC determined that the company would have to get rid of its 25 percent interest in Time Warner Entertainment, a subsidiary that owns most of Time Warner's cable systems. That's unless AT&T can convince regulators it's in the public interest for the company to exercise another option before Jan. 15.

AT&T had hoped to spin off Liberty Media Group, a programming interest, to come into compliance with the federal rules, which limit to 30 percent of the national total the number of satellite and cable subscribers a single company can control. The FCC calculated that the summer acquisition of MediaOne made AT&T serve about 42 percent of the market.

The commission gave AT&T until May to come under its limits, and last Friday was the deadline for the company to tell regulators how it would comply.

Regulators did not react favorably to AT&T's pledge to come into compliance, saying it was not a firm commitment since it was dependent on a tax ruling. The company had said its intention to shed Liberty was contingent on a favorable tax ruling, which it is now seeking.

``Although AT&T has filed a written document that purports to comply with this condition, we conclude that this submission does not satisfy our merger order,'' the commission said.

The company said it still plans to spin off Liberty and affirmed that it would be in compliance by May with the commission's rules.

``We do not believe (the FCC's) order requires us to take any action different from those that we are already pursuing to comply with the merger order,'' the company said. ``AT&T has already taken significant steps toward compliance, and we will continue to work diligently to meet our May 19 obligation.''

The company offered to shed its 25 percent stake in Time Warner Entertainment only if it could not complete its spin-off of Liberty Media.

On Thursday, federal regulators flipped that on its head and determined that AT&T would shed its Time Warner programming stake.

AT&T has been in talks with Time Warner to sell back the 25 percent stake, but so far the talks have produced nothing.

Consumer groups have raised red flags about the overlapping interest AT&T has with Time Warner, the No. 2 cable company, which is soon to merge with America Online. They cheered at the commission decision Thursday.

``It finally looks like the FCC will require the two largest cable companies to get out of their cable partnership,'' said Gene Kimmelman of Consumers Union. ``This opens the door for AT&T and AOL Time Warner to become meaningful rivals in cable programming and Internet services.''

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On the Net: Federal Communications Commission site: http://www.fcc.gov

AT&T: http://www.att.com/