Originally created 02/17/99

AT&T-TCI merger nearing FCC approval



WASHINGTON -- AT&T Corp.'s proposed takeover of cable giant Tele-Communications Inc., which could dramatically change the markets for local phone and Internet service, is nearing final approval by federal regulators.

The Federal Communications Commission is expected this week to clear the deal, which was valued at nearly $32 billion when it was announced in June, said government and industry officials speaking on condition of anonymity.

For consumers, the merger holds the promise of providing a new choice for local phone service -- a prospect appealing to regulators wanting to crack open local phone monopolies to competition. The merger could eventually give residential and business customers one-stop shopping for local, long-distance and Internet services.

The FCC, however, is not expected to force AT&T and TCI to provide other companies with access to TCI's high-speed cable TV lines. Consumer groups, America Online and others had been pressing for the agency to require AT&T to give other companies access to those lines to offer competing services.

AT&T is the nation's largest telecommunications company and biggest provider of mobile phone services. TCI is the nation's second-largest cable TV company, with lines reaching one-third of all U.S. homes.

Many of those TCI lines have been upgraded to permit cable TV customers to connect their computers to the Internet and access online data at speeds as much as 100 times faster than conventional telephone lines.

Eventually, AT&T intends to make TCI's lines capable of providing customers with local phone service, too. AT&T has a separate agreement with cable company Time Warner to provide local phone service over its high-speed cable TV lines. More cable agreements are expected.

The cable agreements thus would give AT&T a way to get into homes without having to rely on phone lines controlled by the regional Bell companies, which dominate the local phone market.

Through the merger, AT&T also will control TCI's stake in AtHome Corp., a leading provider of high-speed Internet access. Consumer groups have said AT&T could charge consumers extra if they got their Internet service over the merged companies' lines but wanted another Internet service provider, such as AOL. But federal regulators are not expected to set any conditions on that part of the deal.

The Justice Department had approved the merger in December on the condition that TCI sell its interest in a rival mobile phone company, Sprint PCS.

Last month, the FCC declined to open a proceeding that would force all cable companies to share their high-speed lines with rivals. But the agency said it would monitor the situation to make sure cable companies don't freeze out their rivals.

Consumer groups and AOL have pressed for the same mandatory access requirements they sought in the merger to apply to all cable companies. AT&T and TCI support voluntary agreements for businesses offering competing services to gain access to their high-speed cable lines.

Shareholders of AT&T and TCI, in separate meetings Wednesday, are to vote on the planned merger. It still must be approved by many local cable franchising authorities. Some local authorities want to provide rivals access to TCI's high-speed lines, but it's unclear if they would have the authority to force any changes.