Major Cable Deal Gains Approval

Friday, May 26th 2000, 12:00 am
By: News On 6

WASHINGTON (AP) — AT&T Corp. is inching toward completion of a massive merger that builds on its plan to deliver high-speed Internet access, local phone service and television programming directly into homes using cable TV lines.

The Justice Department gave conditional approval Thursday to the company's acquisition of MediaOne Group Inc., making the nation's top long-distance carrier also the nation's largest cable company.

The merger still requires approval from the Federal Communications Commission.

Under a consent agreement with the Justice Department, AT&T agreed to shed its stake in Road Runner, the nation's second-largest provider of high-speed Internet access, which MediaOne has an interest in. AT&T already has a controlling interest in the biggest provider of high-speed Internet access, ExciteAtHome.

The department determined that combining both service providers would substantially lessen competition in the distribution of high-speed Internet services.

``The merger as proposed would have had an anticompetitive impact on the emerging broadband market,'' said Joel Klein, assistant attorney general in charge of the antitrust division. Broadband refers to high-speed Web access, which is dozens of time faster than today's dial-up connections. ``American consumers will be the ultimate beneficiaries.''

The department noted that together the two Internet providers serve a majority of residential consumers who have high-speed service.

The department's complaint and a proposed consent decree with AT&T were filed Thursday in U.S. District Court in the District of Columbia.

Under the decree, AT&T must get rid of its interest in Road Runner by Dec. 31, 2001, or earlier if other members of the venture agree. AT&T also must obtain prior approval from the Justice Department before making deals with Time Warner to jointly provide high-speed Internet service in a particular region — or agreements not to offer such service — in the two years after the Road Runner sale. That extends to America Online, if it completes its pending merger with Time Warner.

The department also would have oversight over other agreements, such as those that would prevent either company from giving preferential treatment to content provided by others.

AT&T said it expected the required divestiture of Road Runner and does not anticipate that the consent decree will hinder its ability to offer high-speed Internet services.

``Our acquisition of MediaOne will greatly increase our ability to deliver all of those highly sought consumer services. We can't wait to get started,'' AT&T general counsel Jim Cicconi said. He expected the merger would gain FCC approval shortly.

Consumer groups said they would have liked an earlier date of divestiture, but believe the Justice Department's complaint bolsters their assertion that high-speed Internet service is its own competitive market.

That point could play a role in future debates over whether high-speed cable Internet service should be regulated, which the FCC has declined to do.

``This establishes as a matter of antitrust policy that the broadband market is highly concentrated,'' said Gene Kimmelman of Consumers Union.

``Competition is not going to develop in those markets without a mandate,'' said Andrew Jay Schwartzman, president of the public interest firm Media Access Project.

At the FCC, the deal is facing federal limits how many customers a single cable company can reach. Those regulations forbid one company from controlling more than 30 percent of the multichannel video market, which includes cable and competitors such as direct broadcast satellite.

AT&T's deal with MediaOne would exceed the cap. The FCC staff has proposed steps the company could take to comply with the limits, such as shedding MediaOne's 25 percent stake in cable systems owned by Time Warner.


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