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Posted: Friday, March 2, 2001 | 7:41 a.m.
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Experts don't anticipate antitrust objections in Charter, AT&T deal

Of The Post-Dispatch

Charter Communications Inc. may gain a lock on the St. Louis area cable market with its planned purchase of cable systems from AT&T Corp., but antitrust experts don't expect major challenges to the $1.79 billion deal.

For one thing, no existing competitors are offering cable service to compete with Charter and AT&T systems here. And neither AT&T nor Charter had shown any interest in building a system in the other company's back yard.

"These systems were monopolies to start with," said Nicholas Economides, a professor at the Stern School of Business at New York University. A change of ownership doesn't limit the choices available to individual consumers.

"The situation would have been different if the same customer had two different providers and now he just has one," Economides said.

In the deal announced Wednesday, Charter would more than double its customer base in the St. Louis area to 512,000.

The addition to Charter's empire of the 62 communities in Missouri and 36 in Illinois that have franchise agreements with AT&T would give Charter control of virtually all cable TV in the St. Louis area. As part of the deal, Charter also would get AT&T systems in Nevada and Alabama and AT&T would get two of Charter's cable systems in Florida.

Charter, based in Des Peres, is the nation's fourth-largest cable company. AT&T, which is in the process of separating its AT&T Broadband cable operations and three other business units, is the largest cable company in the nation.

AT&T and Charter "always did have all of the market" for cable service in most of the individual cities in the St. Louis area where they held the franchise, said Robert Crandall, a telecommunications expert at the Brookings Institution.

"Unless you really think that one of them might have overbuilt into adjacent areas," the combination is not likely to raise antitrust regulators' hackles, he said.

The fear of future price increases is not a likely obstacle, either. Crandall said customers already have seen their cable bills go up even before deals like Charter's purchase of the AT&T systems. But the number of channels and array of choices for customers also have increased.

Customers who don't like to pay the higher bills can switch to satellite television -- a competitor of cable companies, he said.

Yet another argument in the deal's favor is the competition Charter may provide in telecommunications. Charter's Pipeline cable-modem service competes with Southwestern Bell's high-speed Internet service in the areas where both are available.

Charter also is testing telephone service in some of its St. Louis County systems. If it can offer telephone service across the entire metropolitan area, it could conceivably provide significant competition to Southwestern Bell.

AT&T also provides telephone service to as many as 11,000 customers in the St. Charles area, Charter officials said Wednesday. The future of that service hasn't been determined. A Charter spokesman said it was unclear whether AT&T is selling the telephone system in St. Charles along with the cable franchises there.

Cable television faces competition from satellite-television services like Direct TV and Dish Network, said Michael Kupinski, an analyst with A.G. Edwards & Sons.

"I don't think we're in a situation where a cable company can rest on its laurels," Kupinski said.

To reach reporter Jerri Stroud:\E-mail:\Phone: 314-862-2146


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