FCC approves AT&T, MediaOne merger

More than a year after it was announced, the FCC has finally given its approval to AT&T's merger with MediaOne, confirming AT&T's status as the largest cable operator in the US with 16 million customers. Company officials said they hope to finalize the deal by August.

The merger will add MediaOne's 5 million cable subscribers to AT&T's rolls. AT&T Broadband, the company's cable unit will have a presence in six of the top 10 cable markets in the US. Three "super clusters" – Chicago, San Francisco and Boston, will each have more than 1.5 million customers. Twelve other cities have more than 500,000 customers.

Approval has conditions
That concentration of customers is what has concerned the FCC, which is approving the merger on the condition that AT&T comply with rules barring any company from owning more than 30% of the nation's market for subscription-television services. To comply, AT&T will have to do one of three things:

• divest their interests in Time Warner Entertainment;
  
• selling AT&T's programming interests, including Liberty Media Group; or
  
• divest their interests in other cable systems, which involves divesting cable systems serving approximately 11.8% of cable and satellite subscribers nationwide (i.e., more than 9.7 million subscribers, which is more than half of AT&T's current subscribers).

FCC chairman William Kennard, in announcing the decision, warned that the commission will continue to "carefully scrutinize" such mergers, balancing government regulation with an eye to generating competition in a converging telecommunications marketplace. "This decision strikes the appropriate balance between promoting competition in local telephone service and protecting competition in cable and high-speed Internet service," Kennard said. AT&T has until May 19, 2001 to comply with the conditions.

AT&T chairman Michael Armstrong, who has led AT&T's two-year mission to transform the company into a cable/broadband giant, said with the addition of MediaOne's cable network, AT&T Broadband will have one of the most advanced broadband networks in the country. By the end of the year, most of the company's network will be upgraded for two-way communication, allowing AT&T to bundle video, high-speed Internet and cable telephony services.

Open access questioned
The decision brought guarded approval from the openNET Coalition, a consortium of ISPs and Internet related companies. The organization expressed its concern, however, over the lack of an open access requirement and the government's ability to ensure a competitive environment.

"We are encouraged by the FCC's growing recognition that open access is the best policy, said Greg Simon, openNET co-director. "But the decision continues to leave open access to the discretion of the cable industry. In its approval, the FCC indicates that it will continue to monitor AT&T's promise to provide open access in the future. However, by the time the FCC determines if AT&T has fulfilled its vague voluntary commitments on open access, it may be too late to offer customers meaningful choices for cable Internet services.''

Rich Bond, co-director, added "Consumers must still rely on AT&T's discretion in how or even if they will provide a true non-discriminatory access for independent ISPs. While the FCC continues to make positive progress on open access, leaving it to the cable industry to provide open access is inherently dangerous.''

By Tom Butts