AT&T, Time Warner in local phone deal
NEW YORK (AP) - AT&T has struck a deal to offer telephone service over Time Warner's cable systems in 33 states, greatly escalating the long distance phone company's move into local service.
The deal comes as AT&T is close to completing its purchase of Time Warner's biggest rival in the cable TV industry, Tele-Communications Inc.
AT&T had been widely reported to be talking with Time Warner about the possibility of offering phone service over its cable systems.
In the deal announced Monday, AT&T and Time Warner expect to begin offering the new service in one or two cities by the end of 1999 and begin broader commercial operations in the year 2000.
AT&T said Monday's deal, its acquisition of TCI and arrangements with other cable TV companies will give it the potential to supply local phone service to 40% of U.S. households, or 35 million homes, over the next four to five years. In addition to phone service, the venture will offer interactive digital television and high-speed Internet service.
AT&T's acquisition of TCI is expected to be completed this spring.
AT&T will own slightly more than three-quarters of the joint venture and Time Warner the rest. AT&T estimates it will spend $600 million on costs resulting from the venture in the first two years. In addition, it will spend between $300 and $500 to equip each home to handle telephone services over cable lines.
Time Warner will get monthly fees ranging from $1.50 to $6 per home over six years.
The arrangement is expected to have annual sales of $4 billion after three years.
AT&T has been spending furiously to break into the $110 billion local phone market at a time when its share of the long-distance business is slipping.
In addition to its planned acquisition of TCI, the nation's second-largest cable company, AT&T spent $11.3 billion last year on Teleport Communications, a smaller local phone company.
AT&T hopes consumers will be enticed by the convenience of receiving phone service channeled through the same cable TV circuits that deliver hundreds of channels, Internet access and online banking.
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