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To: GST who wrote (37810)	2/1/1999 7:20:00 PM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 164684

February 1, 1999 AT&T to Offer Telephone Service Using Time Warner Cable System An INTERACTIVE JOURNAL News Roundup AT&T Corp. struck a deal to offer telephone service over Time Warner Inc.'s cable systems in 33 states, accelerating the long-distance phone company's move into local service and clearing the way for deals with other cable companies. The deal comes as AT&T, based in New York, is close to completing its purchase of Time Warner's biggest rival in the cable TV industry, Tele-Communications Inc. AT&T said that with access to Time Warner and Tele-Communications, it will be able to reach 40% of U.S. households -- about 35 million homes -- in four or five years. But AT&T is pushing for even greater coverage, and the Time Warner agreement could help break a logjam that has slowed those efforts. Other cable companies had been reluctant to strike deals with AT&T until its widely expected -- and recently delayed -- deal with Time Warner came to fruition. Other cable services wanted to have a glimpse at the Time Warner pact's terms before finalizing their own deals with AT&T. AT&T and Time Warner agreed to form a joint venture that will be 77.5% owned by the big phone company. The AT&T-led venture will pay Time Warner $15 per home as systems are installed, for a total of about $300 million. In addition, the venture will pay a monthly fee of $1.50 for each telephone subscriber, rising to $6 a month over a six-year period. Further, AT&T will cover the cost of upgrading Time Warner's cable TV lines to handle two-way communications. Costs to install the system are seen ranging between $300 and $500 per home. The venture is expected to have annual sales of $4 billion after three years, AT&T said. In addition to phone service, the companies set plans to offer interactive digital television and high-speed Internet service. "Today's announcement with Time Warner will significantly advance AT&T's ability to offer end-to-end 'any distance' communications services to American consumers and businesses," AT&T's chairman, C. Michael Armstrong, said in a statement. The stakes are high for AT&T. It is moving aggressively to expand its presence in the local phone service market as its long-distance service remains under intense competitive pressure. In doing so, AT&T is battling the Baby Bell companies that it owned until the giant telecommunications company was broken up by the U.S. government in 1984. In addition to its planned acquisition of TCI, expected to be completed in the spring, AT&T spent $11.3 billion last year on Teleport Communications, a smaller local phone company. The companies said Leo Hindery, president of TCI, will head the AT&T/Time Warner venture. Mr. Hindery will head AT&T's cable-service operations once AT&T's purchase of TCI is completed.