AT&T Urges Cap Waiver On FCCers

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Washington -- AT&T Corp. is continuing its effort to
gain a Federal Communications Commission waiver from cable-ownership rules following its
planned acquisition of MediaOne Group Inc.

FCC officials have told AT&T that the purchase of
MediaOne would put the company over the agency's cap, which now stands at 30 percent
of subscribers to pay TV services, according to FCC and industry sources.

Although the FCC is not enforcing the rule, it plans to
revive it if the U.S. Court of Appeals for the District of Columbia circuit upholds the
statute that Congress passed authorizing FCC action. The court heard oral arguments in
December and a ruling is expected soon.

In the last two weeks, both AT&T chairman C. Michael
Armstrong and AT&T general counsel James W. Cicconi have held meetings with senior FCC
officials on the ownership question.

Armstrong and Cicconi met on March 16 with FCC commissioner
Michael Powell. Cicconi also met individually with Kathryn Brown, FCC chairman William
Kennard's chief of staff, according to FCC records.

The records state they discussed both AT&T's
request for an 18-month waiver from the rule and AT&T's management rights in Time
Warner Entertainment Co.

After buying MediaOne, AT&T would hold a 25 percent
stake in TWE, a limited partnership with 9.7 million cable subscribers and programming
assets that include Home Box Office.

In a March 17 submission with the FCC, AT&T said it
would have an ownership interest in 40 percent of cable subscribers after buying MediaOne,
but only if TWE subscribers were included in the total.

If TWE's subscribers were excluded from the total,
AT&T would have 28 percent of subscribers and thus be in compliance with the rule,
according to the AT&T filing.

The FCC and AT&T disagree on whether the TWE stake
should count. The FCC believes TWE is attributable because AT&T owns cable networks
that sell their services to TWE. AT&T counters that because it would have no say in
determining TWE's programming decisions, the stake should be excluded under FCC rules
that insulate certain limited partnerships.

The FCC is taking a close look at the TWE investment,
because the agency is concerned about concentration in the cable-programming acquisition
market.

A recent press report said the Justice Department, which is
reviewing the AT&T-MediaOne merger, is attempting to force AT&T to divest one of
its high-speed cable modem services -- either Excite@Home Corp. or the 34 percent stake in
Road Runner it would acquire in the MediaOne deal.

After a Senate hearing last week, Joel Klein, the Justice
Department's antitrust enforcer, declined comments on the ground that the merger was
pending before his office.

If forced to comply with the FCC's 30-percent limit,
AT&T might have to sell cable systems or programming interests.

AT&T officials insist that they have a range of options
before them and have not said which actions they would take to come into compliance.

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