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To: PaperChase who wrote (442)	10/8/1999 5:23:00 PM
From: DenverTechie	Read Replies (1) \| Respond to of 847

FCC Cable Vote a Mixed Bag for AT&T Entire article can be found at news.cnet.com WASHINGTON--The Federal Communications Commission voted to relax its cable television ownership rules, potentially lowering the regulatory obstacles AT&T must clear to win regulatory approval of its $55 billion purchase of MediaOne Group. The agency decided to keep in place ownership rules that bar a company from having access to more than 30 percent of U.S. cable households. Yet it changed the way it measures the size of the market to include subscribers of satellite TV companies, effectively raising the cap to 36.7 percent. The AT&T-MediaOne combination would make AT&T the largest national cable operator, with access to more than half of the 95 million households able to buy cable service. That means the company still will be forced to shed subscribers or find a way to restructure its current cable investments to comply with the new rules, analysts said. "The current AT&T-MediaOne deal is going to have to be significantly modified to pass regulatory muster," said Scott Cleland, managing director of Legg Mason's Precursor Group. At the same time today, the agency put the rules on hold until after a federal appeals court challenge of its previous rules is settled. Companies would have to come into compliance within six months if the rules are upheld. Defining a minority stake The FCC effectively softened the blow on AT&T by altering its rules defining when a minority stake in a cable system is "owned." The agency upheld the rule that counts a company as owned if a cable operator has a 5 percent voting stake or partnership with another cable system. It gave AT&T flexibility to have an interest in other cable services to offer Internet and other non-video services without it counting toward the ownership limits. The new flexibility in calculating the minority interests "gives them an opportunity to do some creative restructuring," said Cleland. That flexibility is important for AT&T because MediaOne has a 25.5 percent stake in Time Warner Entertainment, which operates most of Time Warner's cable TV systems. Those systems would have been counted in AT&T's total under the old rules, which the FCC had voluntarily put on hold pending the outcome of a federal appeals court challenge. Oral arguments in the case are set for December 3 and the agency said the new rules will take effect six months after the court's ruling. The agency also voted to raise the stake a "passive" investor could hold in a cable system without having it counted toward the national ownership cap. The limit was raised to 20 percent from 10 percent. The FCC voted as well to eliminate a rule that let a company own up to 49 percent of a system if there is a single majority shareholder. Finally, the FCC voted to create a new rule that would consider a company "owned" if an investor holds more than 33 percent of a cable company's total assets, which could be a combination of debt, voting, and non-voting equity.