FCC issues could derail AT&T/TCI merger

A final report and order regarding the disposition of the pending $48 billion merger of AT&T and Tele-Communications Inc. could be released by the FCC's Cable Bureau during the first quarter of 1999. But there are several issues even FCC insiders acknowledge could derail the time frame.

The Cable Bureau is mulling two sets of industry comments submitted in October and November. The upshot is that most opposing telcos, consumer groups and Internet service providers are worried that a marriage between two giants would create a behemoth that will be almost impossible to fight. There also is much concern as to how the newly created company will be regulated-under Common Carrier rules or under Cable Service rules.

ISPs, notably BellSouth, believe they should have access to telecom lines that will be controlled by the new company in an unbundled manner so customers will not pay twice for Internet usage. TCI's high-speed Internet @Home service, to which other ISPs want access, costs customers about $40 a month. @Home customers wanting high-speed access to other ISPs pay full price.

In comments to the FCC, AT&T and TCI claim they do not prevent customers from accessing other service providers and that charges for @Home pay for the upgrades to allow Internet service over cable wires.

The uproar regarding this issue has been so explosive that FCC Chairman William Kennard was forced last week to deny rumors that the commission would not address the role of the Internet during its deliberations.

The FCC has scheduled a general hearing regarding industry mergers Dec. 14. The afternoon session will address the AT&T/TCI situation. Opinions gathered during the hearing, coupled with a draft report and order expected soon, will help commissioners solidify their opinions of the merger.

BellSouth RBOC filed comments at the FCC asking the combined AT&T/TCI be forced to open network elements to competitors like telcos

Local municipalities Under most franchise agreements, the combined company must apply for franchise transfers from local cable boards. Hundreds of government bodies with thousands of local politicians must sign off.

Other cable operators Having TCI in the fold is just the start, as AT&T attempts to build a ubiquitous facilities-based competitor in local voice. Getting other multiple system operators in the fold could prove difficult.