Comcast-AT&T Deal Likely Wouldn't Face
By RIVA RICHMOND
Of DOW JONES NEWSWIRES
NEW YORK -- Comcast Corp.'s (CMCSA) bid to become the
nation's largest cable company, should its unsolicited offer
to buy AT&T Corp.'s (T) cable operations succeed, is
unlikely to face serious antitrust hurdles.
And Comcast has AT&T to thank.
It was AT&T's legal challenge that swept away the
federal restrictions on cable companies' market share that
might have curtailed Comcast's expansionary ways.
The Federal Communications Commission had imposed a rule
capping market share at 30% of the nation's cable and
satellite-television subscribers. But after AT&T merged
with MediaOne Group and exceeded the limit - precipitating an
FCC effort to force the company to sell some assets - it
fought the rule in court and won in March.
The ruling pushed the FCC to grant AT&T a reprieve from
a deadline to sell assets while the agency reviews the rule.
What alternate limits might be imposed are unknown, creating
"a major source of uncertainty for any AT&T-Comcast deal,"
but they are likely to be more liberal, said Pantelis
Michalopoulos, partner and antitrust expert at law firm
Steptoe & Johnson.
"If there is no bright-line test, it will be difficult for
this Administration and the FCC to stop this deal," he said.
Because the Bush Administration is philosophically committed
to limited use of regulation, it is unlikely to use "public
interest standards" or antitrust laws to make a case against
the deal, Michalopoulos said.
If Comcast, Philadelphia, acquires AT&T's cable assets
it will gain about 14.5 million subscribers, creating the
nation's largest cable company by far with more than 22
million subscribers, for a cap-busting one-third market
Comcast offered on Sunday to pay $44.5 billion and assume
$13.5 billion in debt, and has indicated it's prepared to
sweeten its bid. AT&T has said it has no intention of
selling its cable assets, though it is evaluating the
AT&T spent more than $100 billion in cash and stock in
1999 to buy MediaOne and, earlier, Tele-Communications Inc.
Comcast is offering to buy the entire empire for about half of
what AT&T paid to build it.
AT&T said it plans to move ahead with its restructuring
plans announced in October that would create four new publicly
held companies under the AT&T brand.
The first of those companies was born Monday, when AT&T
completed the spinoff of AT&T Wireless Group Corp. (AWE).
The cable operations that Comcast seeks to buy constitute what
would be AT&T Broadband, a cable TV and broadband service
provider. The other two companies to be created are AT&T
Business, an enterprise communications and networking company,
and AT&T Consumer, a consumer communications and marketing
Comcast wants to do the deal now, as opposed to after
AT&T Broadband goes public, while it can be done tax free.
It has offered to assume billions more in debt and issue
additional equity to buy AT&T's interests in Time Warner
Entertainment, Cablevision Corp. and Rainbow Media. AT&T
has been trying to sell these stakes to reduce its debt
The Time Warner Entertainment stake, ironically, is one of
the assets that the FCC had sought to force AT&T to sell
in order to drop below the 30% market-share cap.
AT&T may be splitting to pieces and looking to shed
cable assets, but other cable companies are building mass.
"It's a wake-up call. Deals such as AT&T-Comcast are a
reality, and big cable will become even bigger," Steptoe &
Johnson's Michalopoulos said. "Even if this doesn't happen...
I think we will see more consolidation among cable
Comcast has been a hungry predator in the last 18 months,
completing five major acquisitions that have doubled its size.
The company reported year 2000 net income of $2.02 billion on
revenue of $8.2 billion, compared with net income of $1.1
billion on revenue of $6.5 billion in 1999.
"There are serious concerns with the creation of such a
cable colossus, but they're the kind of concerns this
administration will not deal with," Michalopoulos said.
Foremost among them would be Comcast's tremendous buying
power. Its size could allow it to squeeze independent content
providers and obtain special treatment from affiliated
Michalopoulos said Comcast has already used a legal
loophole to gain exclusive rights to Philadelphia sports
content. The company could extend the use of such tactics into
other programming areas.
professor at New York University's Stern School of Business,
agreed Comcast's buying program could come under scrutiny. He
said cable operators are typically monopolies in particular
regions, so mergers don't necessarily create antitrust
problems related to geography.
It's possible that buying rules could be imposed as part of
the FCC approval process. "But there is a bias in this
administration against imposing conditions, philosophically
that is," Michalopoulos said.
The overall goal of the FCC's ownership rules, established
under the authority of the 1992 Cable Act, was to preserve
competition and diversity of programming choices for
consumers. The court upheld that overall goal in an earlier
-By Riva Richmond, Dow Jones Newswires, 201-938-5670
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