Armstrong, Hindery Lobby FCC on Ownership Vote

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Washington -- AT&T Corp., backed by congressional
allies, is pressuring the Federal Communications Commission to be as flexible as possible
with new cable-ownership rules that the agency is expected to adopt at a special Oct. 8
meeting.

AT&T chairman C. Michael Armstrong and AT&T
Broadband & Internet Services president and CEO Leo J. Hindery Jr. both paid visits to
top FCC officials last week, urging them to craft rules that cause little, if any, damage
to AT&T's plans to acquire MediaOne Group Inc. and a 25.5 percent stake in Time
Warner Entertainment.

Topping things off was a Washington visit by Amos
Hostetter, an AT&T director and prospective nonexecutive chairman of AT&T
Broadband. While he skipped making the rounds at the FCC, Hostetter gave a speech in which
he basically told the commission that if the rules mangle AT&T's merger plans,
the agency will ruin the best chance for local phone competition.

"It is in this context that the [FCC] should review
the cable-ownership rules, and I hope it will do what is necessary to kick-start the
market for competitive services," Hostetter said in a speech to the Washington
Metropolitan Cable Club.

Current FCC rules, which are not being enforced, bar one
cable operator from owning systems that pass more than 30 percent of all U.S. homes. The
agency is expected to adopt a 30 percent to 40 percent cap, but to base it on the total
number of subscribers to cable and direct-broadcast satellite, rather than on homes
passed.

While that's a change AT&T would welcome, the real
lobbying battle is over whether FCC rules will count AT&T's ownership in TWE and
Cablevision Systems Corp. toward the cap. Current FCC rules count those investments, and
FCC officials said AT&T would have a financial interest in systems that pass about 67
percent of U.S. homes and a proportional amount of cable subscribers.

"A key component of this is the attribution
rules," Hostetter conceded.

AT&T claimed that TWE and Cablevision should not count
because as a minority partner, it would have no authority to tell TWE and Cablevision
executives which cable networks to carry. AT&T added that its investments would not
cause the FCC to worry that one company could dominate the programming-acquisition market.

But Hindery -- speaking at a television forum here last
week sponsored by Broadcasting & Cable magazine (a sister publication to Multichannel
News
), acknowledged that some ownership caps were necessary.

"There should be a limit on how much any one company
should own," he said. "What it should be is subject to debate."

FCC sources said last week that they were still debating
the details of the cap and attribution. But one senior FCC official said the rules will
not depart markedly from current policies, which the agency must defend before the U.S.
Court of Appeals for the District of Columbia Circuit Dec. 3.

Last week, Time Warner Inc. asked the court to postpone
arguments indefinitely because the FCC was so close to issuing new rules.

Hostetter said he was hopeful that the FCC would see things
AT&T's way.

"I have great confidence in the commission, and I
think that when they have the opportunity to review the facts that have been put before
them, they will come to a sensible conclusion," he said.

AT&T's position won support from some House and
Senate lawmakers, who wrote letters to FCC chairman William Kennard telling him that
AT&T posed no threat to competition in the programming market.

"In the seven years since Congress adopted the
cable-ownership limit, the number of programming services has more than doubled, despite
the fact that during that time, no choice ownership limit has been in effect," said
one letter signed by Sens. Sam Brownback (R-Kan.), Don Nickles (R-Okla.), Conrad Burns
(R-Mont.) and Bill Frist (R-Tenn.).

And a bipartisan group of House lawmakers sent Kennard a
letter Sept. 24 saying that relaxation was justified to promote local phone competition.

"We strongly encourage the [FCC] to revise its
horizontal-ownership and attribution rules to promote, rather than discourage, local
telephone competition," the lawmakers said, although no specific recommendations were
included.

The signatories were Reps. Mike Oxley (R-Ohio), Richard
Burr (R-N.C.), Bart Stupack (D-Mich.), John Shimkus (R-Ill), Diana DeGette (D-Colo.), Tom
Coburn (R-Okla.) John Shadegg (R-Ariz.), Frank Pallone Jr. (D-N.J.), Chip Pickering Jr.
(R-Miss.) and Ed Bryant (R-Tenn.).

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