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To: KailuaBoy who wrote (15051)	9/1/1999 3:05:00 PM
From: Ahda	Read Replies (1) \| Respond to of 29970

By Aaron Pressman WASHINGTON, Aug 30 (Reuters) - Staff of the Federal Communications Commission have proposed only modest changes to rules limiting cable television ownership, creating a major headache for AT&T Corp.'s acquisition of MediaOne Group Inc. if the agency's five commissioners approve the plan. AT&T's (NYSE:T - news) $58 billion purchase of No. 3 cable operator MediaOne (NYSE:UMG - news) would take it well over the current ownership limits, but the long distance telephone and cable giant has been lobbying the FCC to relax the rules. AT&T says it needs tremendous reach if it is to use its cable systems to compete successfully against the dominant Bell companies in the market for local telephone service. Staff of the FCC rejected that approach, according to people familiar with the proposal. A staff report sent to the five commissioners noted that a 1992 cable law requires ``reasonable' limits to prevent cable operators from dominating the market for cable programming like sports, news and entertainment channels. A majority of commissioners could approve the proposal as soon as a scheduled Sept. 15 meeting, although the plan could be changed before then or the vote could be postponed. Also, the rules are the subject of a protracted, six-year legal battle between the FCC and the industry and changes to the current rules might not take effect immediately. The agency agreed not to enforce the current rules, which were found unconstitutional in 1993. An appeals court will hear the case in December. Under the staff proposal, a single cable operator would continue to be limited to reaching 30 percent of the nation, people familiar with the plan said. The plan would relax the rules somewhat by expanding the definition of the cable market to include more than 10 million satellite television subscribers. The current rules measure ownership by counting the number of homes in a company's territory that are capable of being hooked up to cable. Most important -- and most troublesome -- for AT&T is the proposal's stance on determining when to count a company's minority ownership stake against the national limit. The proposal relies on so-called attribution rules recently adopted by the FCC for television broadcasters, people familiar with the plan said. That would maintain the current rule that a company must count toward the national cap any system in which it has a 5 percent ownership stake. Using the proposed market that includes satellite subscribers, AT&T and MediaOne would own systems comprising about 24 percent of the national market, according to AT&T's merger filing at the FCC. That would be safely below the cap, but the proposed attribution rules would also appear to include AT&T's stake in Cablevision Systems Corp. (AMEX:CVC - news) and MediaOne's stake in Time Warner Entertainment, a joint venture with Time Warner Inc. (NYSE:TWX - news) Adding the subscribers from those operators would put AT&T's reach at about 42 percent of the national audience -- well above the 30 percent limit. AT&T officials declined to discuss the FCC staff proposal. A spokesman said the current rules needed to be relaxed to allow AT&T to acquire MediaOne and bring greater competition to the local telephone market. ``We feel like we've made a pretty strong case for having rules that would allow us through our acquisition of MediaOne to provide a viable competitor to the Bell companies,' the spokesman said. The company has previously said it would seek to comply with whatever ownership limits the FCC ultimately sets.