AT&T-TCI merger on track

Deal under fire from Internet players

By CHRISTOPHER STERN

WASHINGTON -- The FCC is expected to give final approval to the AT&T-TCI merger as soon as next week now that the agency topper has stated publicly that he will not require the telco to separate its high-speed Internet service from its @Home Internet business.

The deal is under fire from powerful Internet players such as America Online and MCI Worldcom, who oppose AT&T's decision to require high-speed Internet subscribers to also sign up for @Home -- which provides online content.

"That's not going to be considered as part of the merger," said Federal Communications Commission Chairman William Kennard. "We can't predict where it's going, and we can't presume to have a solution for every problem that's going to arise."

In the past, Kennard had said that the agency should resist the "seductive" suggestion that it had to "perpetuate a monopoly in order to create higher bandwidth." But AT&T threatened to walk away from the $40 billion merger unless it was approved without any conditions.

There is considerable pressure on the FCC to approve the AT&T-TCI merger because the telco has promised to use cabler's wires to enter the local telephone business. The Telecommunications Act of 1996 will celebrate its third birthday on Monday, but the promised competition in the local telephone market has yet to materialize. AT&T has promised lawmakers and regulators that it will begin competing vigorously with the Baby Bells in areas where TCI, and now Time Warner, have extensive cable infrastructure.

Kennard may also be motivated to approve the deal now that he has made a high-speed Internet network one of his administration's highest priorities.

Kennard's public statement that he would allow AT&T to proceed with it's acquisition of TCI without any conditions on the relationship with @Home comes days after the agency decided against conducting a study of the potential anti-competitive effects of bundling high-speed service with Internet content services.

Currently @Home has approximately 300,000 subscribers and less than 500 employees. Despite it's promise, AT&T has not made a firm commitment when it comes to a rollout of its local telephone service.

In addition, America Online announced the creation of a coalition earlier this week called the OpenNet, which is targeting @Home's preferred status on AT&T's high-speed Internet business. Among it's members are America Online, U.S. West and MCI Worldcom.