Bloomberg: Part 2:AOL, AT&T May Link for Access After Portland Ruling (Update2)
quote.bloomberg.com
AOL, AT&T May Link for Access After Portland Ruling (Update2)
(Updates with additional
analyst comments.)
New York, June 7 (Bloomberg) -- America Online Inc., the largest Internet service provider, and
AT&T Corp., which is set to become the No. 1 U.S. cable-television company, may team up to
provide high-speed access after a federal judge ruled AT&T must let rivals use its cable network
in Oregon, analysts said.
Portland-area officials this year approved the transfer of Tele-Communications Inc.'s
cable-television franchise to AT&T on the condition that TCI's cable system be opened for use by
outside Internet companies. TCI, which AT&T bought for $59.4 billion in March, and AT&T sued.
AT&T agreed last month to acquire MediaOne Group Inc. for $62.5 billion.
AT&T is buying cable companies and upgrading networks to offer local, long-distance, cable and
Internet services over a single connection. AOL and other Internet companies want to use AT&T's
upgraded cable lines to provide high-speed data services. ''This gives AOL and ISPs some
leverage in negotiating wholesale deals with AT&T,'' said Daniel Zito, an analyst with Legg
Mason Wood Walker Inc. who rates AT&T ''outperform.'' ''If such an agreement can be struck, all
of the wind goes out of the open-access sail instantaneously.''
AOL already has teamed up with local phone companies Bell Atlantic Corp. and SBC
Communications Inc. to provide high-speed Internet services. An agreement with New
York-based AT&T would give AOL access to about 15.9 million cable customers, including those
AT&T will acquire from MediaOne and those Comcast Corp. has an option to buy as a result of
the AT&T-MediaOne agreement.
AOL didn't immediately return calls seeking comment. AT&T General Counsel James Cicconi
said on the CNBC cable-TV network that the company is willing to talk with AOL and any other
Internet access provider about using AT&T's cable network. ''We believe in open systems,''
Cicconi said. ''We're willing to negotiate with anybody in terms of carriage on those systems.''
AT&T shares rose 1/8 to 53 1/2. AOL fell 3 to 115.
Ruling to be Appealed
Analysts don't expect Judge Owen Panner's ruling in favor of open access to stand.
Providing cable and phone access to the 100 million households and 20 million businesses in
the U.S. ''has always been and will always be the province of the titans,'' said Ken McGee, vice
president and research fellow at market researcher Gartner Group Inc. ''Startups are not going
to provide access for all those locations.''
Although the appeals process could take nine months or more, analysts said they don't think
Panner's ruling will affect AT&T's pending purchase of MediaOne. ''There's more incentive now
than there ever was before (for AT&T) to cut a deal with AOL,'' said Tod Jacobs,
telecommunications analyst at Sanford C. Bernstein & Co., who rates AT&T ''outperform.''
More high-speed access would mean more revenue from Web- based advertising, Jacobs said.
Also, he said, AOL would probably garner more subscribers for its service over a cable modem
connection than the cable companies could attract to their own Internet services, Excite At Home
Corp. and Road Runner.
Regulatory Intervention?
Some analysts say AT&T might go to the U.S. Federal Communications Commission for relief,
asking federal regulators rather than local governments to oversee franchise transfers and
related matters. ''AT&T would much rather have the FCC ruling things,'' said Tom Wolzien, a
cable analyst at Sanford C. Bernstein.
Historically, although the commission has tightly regulated the market for local phone service, it
hasn't been eager to intervene in the cable industry, said Brian Adamik, senior vice president at
market researcher Yankee Group. ''I don't think that the mere fact of this decision is going to
prompt the FCC to say anything,'' said Susan Lynner, senior telecommunications policy analyst
at Prudential Securities Inc. ''Right now, they'd be better off to see what happens next.''
------------------
From Bloomberg:
AOL, AT&T May Link for Access After Portland Ruling
New York, June 7 (Bloomberg) -- America Online Inc., the largest Internet service
provider, and AT&T Corp., which is set to become the No. 1 U.S. cable-television
company, may ally to provide high-speed access after a federal judge ruled AT&T
must let rivals use its cable network in Oregon, analysts said.
Earlier this year, Portland-area officials approved the transfer of
Tele-Communications Inc.'s cable-television franchise to AT&T on the condition
that TCI's cable system be opened for use by outside Internet companies. TCI,
which AT&T bought for $59.4 billion in March, and AT&T sued. AT&T agreed
last month to acquire MediaOne Group Inc. for $62.5 billion.
AT&T is buying cable companies and upgrading their networks to offer local,
long-distance, cable and Internet services over a single connection. AOL and other
Internet companies want to use AT&T's upgraded cable lines to provide their
high-speed data services.
''This gives AOL and ISPs some leverage in negotiating wholesale deals with
AT&T,'' said Daniel Zito, an analyst with Legg Mason Wood Walker Inc. who
rates AT&T ''outperform.'' ''If such an agreement can be struck, all of the wind goes
out of the open access sail instantaneously.''
AOL already has teamed up with local phone companies Bell Atlantic Corp. and
SBC Communications Inc. to provide high-speed Internet services. An agreement
with New York-based AT&T would give AOL access to about 15.9 million cable
customers, including those AT&T will acquire from MediaOne and those Comcast
Corp. has an option to buy as a result of the AT&T-MediaOne agreement.
AT&T General Counsel James Cicconi said on the CNBC cable-TV network that
the company is will to talk with AOL and any other Internet access provider about
letting them use AT&T's cable network.
''We believe in open systems,'' Cicconi said. ''We're willing to negotiate with
anybody in terms of carriage on those systems.''
Shares of AT&T shares fell 1/8 to 53 1/4. AOL fell 3 1/2 to 114 1/2.
Jun/07/1999 16:30
For more stories from Bloomberg News, click here.
|
