Things should get interesting now.
***********************************
Bloomberg News
Mon, 05 Jun 2000, 5:27pm EDT
AT&T-MediaOne Wins FCC Approval; Cable Assets Shed (Update2)
By Heather Fleming Phillips and Jonathan Cox
Washington, June 5 (Bloomberg) -- AT&T Corp.'s $54.7 billion purchase of MediaOne Group Inc. won conditional approval from the Federal Communications Commission, with ``significant'' sales of cable television assets ordered to meet ownership restrictions.
The FCC gave the new company until next May to comply with a rule barring a company from serving more than 30 percent of U.S. pay TV subscribers. AT&T-MediaOne will serve more than 40 percent, which the commission said would give the company too much market power.
The agency gave AT&T three options to meet the ownership limits. The company can sell its 25.5 percent stake in Time Warner Entertainment, a joint venture that owns cable systems; eliminate its ownership in Liberty Media Group Inc., a programming arm run by cable pioneer John Malone; or sell cable systems servicing 9.7 million subscribers nationwide. AT&T must make a choice and notify the FCC within six months of closing the transaction.
FCC Chairman William Kennard said AT&T will have to make ``significant divestitures'' of its cable assets to meet the ownership rules. He said AT&T-MediaOne posed ``challenges'' for the agency as it sought to balance consumer interests and market competition in crafting the decision.
FCC approval is the final regulatory action. The Justice Department approved the combination last month, requiring the company to shed its stake in Road Runner, the high-speed Internet service provider that offers its service over cable TV lines.
Shares of New York-based AT&T rose 1 to 38 1/8 in New York Stock Exchange trading of 14.2 million, and MediaOne rose 2 1/16 to 69 1/16 in NYSE trading of 2.1 million. Time Warner fell 2 1/4 to 81 1/2 in NYSE trading of 2.1 million.
AT&T said it planned to close the transaction ``as soon as possible'' and create the largest U.S. cable TV company, without elaborating on plans to meet the FCC order to sell some assets.
Ownership Limits
The FCC's order forces AT&T to weigh the sale of Liberty, which may generate a multibillion dollar tax bill, shedding Time Warner Entertainment, a key to its plan to build a nationwide telephone and video network, or sell almost half its existing cable TV customers.
The rules limiting cable ownership have been mired in legal challenges and policy debates for years. Congress, concerned that independent TV programmers might be unable to get channels on monopoly cable systems, required the FCC in 1992 to set cable TV ownership guidelines. The underlying law requiring the limits has been challenged in federal court on First Amendment grounds, and it was upheld last month.
The rules setting the limits are still being challenged by AT&T and others. Oral arguments are set for December.
The agency rejected AT&T's request for as much as 18 months to comply with the ownership rules, and gave the company until May 19, 2001 -- a year after a federal appeals court decision.
``We feel in order to be fair and be commercially reasonable we have to give them additional time,'' Kennard said. Still, the agency gave Viacom Inc. a year to comply with rules limiting the number of stations companies can own in a single market.
Choices
AT&T got Liberty, which has invested $52 billion in media and technology companies, when it acquired Tele-Communications Inc. in March 1999. If AT&T sheds Liberty within two years, it could face a multibillion tax bill unless it convinces the Internal Revenue Service that it has a legitimate reason forcing the sale -- a tough hurdle.
Counting Time Warner Entertainment, AT&T would have 33.2 million customers or about 40 percent of the market. Without it, AT&T would have about 23.7 million, or 29 percent.
Several analysts said AT&T, which has spent $120 billion to buy cable operators and upgrade systems, wants to keep Time Warner Entertainment to gain leverage in negotiating an arrangement to sell AT&T-branded phone service to Time Warner Entertainment's 9.4 million customers.
The problem for AT&T is that the 9.4 million cable customers of Time Warner Entertainment, the joint venture of MediaOne and Time Warner, are ``owned'' by AT&T, based on MediaOne's 25.5 percent investment and Liberty's sale of programming to the cable partnership. The FCC's rules are aimed at preventing a single company from having too much control over programming and the AT&T- Time Warner Entertainment relationship is considered too cozy under the agency's standards.
A sale of Liberty would satisfy the rules by eliminating the programming link with Time Warner Entertainment. Without Liberty, Time Warner Entertainment would be considered independent of AT&T.
***********************************
biz.yahoo.com
Monday June 5, 4:49 pm Eastern Time
Company Press Release
SOURCE: AT&T
FCC Approves AT&T Merger With MediaOne
WASHINGTON, June 5 /PRNewswire/ -- The Federal Communications Commission today approved AT&T's merger with MediaOne, which will add 5 million cable subscribers and expand the company's ability to deliver new consumer communications, information and entertainment services. AT&T said it plans to close the merger as soon as possible.
With the addition of MediaOne, AT&T will become the country's largest cable operator, with about 16 million customers on the systems it owns and operates.
``This merger will mean a real choice and lower prices in local phone service, faster Internet access and better cable TV,'' said AT&T Chairman and CEO C. Michael Armstrong. ``For consumers, that's a home run in any ballpark.''
AT&T said the FCC's action today also helps fulfill Congress' goal of turning cable into a viable competitor to the local phone monopolies and will accelerate the deployment of broadband services.
Armstrong 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, making it capable of delivering analog and digital video, high-speed Internet access, cable telephony and interactive television.
With MediaOne, AT&T Broadband will have a presence in six of the top 10 cable markets, Armstrong said. Its systems will be clustered for efficient delivery of services. Three ``super clusters'' -- Chicago, San Francisco and Boston -- will each have more than 1.5 million customers. Twelve other cities will have more than 500,000 customers.
``I want to thank Chairman Kennard and the other Commissioners for their hard work in analyzing this transaction and in recognizing the consumer benefits it will bring,'' said Armstrong. ``The combination of AT&T and MediaOne will accelerate the delivery of choice and competitive pricing that consumers so clearly want.''
SOURCE: AT&T |
