Debate Continues Over AT&T-TCI Merger

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Washington -- Several parties said the Federal
Communications Commission should impose conditions on the proposed merger of AT&T
Corp. and Tele-Communications Inc. to ensure that consumers, local governments and
competitors aren't unfairly disadvantaged by the deal.

Their comments -- during an en banc hearing on the proposed
merger last week -- came as the FCC is deciding whether to approve the deal and, if so,
whether to impose conditions.

A representative from AT&T said unconditional approval
of the merger would benefit consumers.

But Gene Kimmelman, co-director of the Consumers
Union's Washington, D.C., office, said AT&T likely didn't have all consumers
in mind when it decided to merge with TCI.

Kimmelman added that the companies would likely bring
phone-service and data competition only to "the most wealthy" 10 percent to 30
percent of consumers, ignoring middle- and lower-income populations.

"It's the perfect opportunity [for AT&T-TCI]
to expand the market at the high end," he said.

Kimmelman added that he doesn't doubt that the
companies would like to serve all consumers, but the high cost of rebuilding networks
would steer the merged company toward higher-end markets unless the FCC imposed conditions
requiring more coverage.

According to John C. Gamboa, executive director of the
Greenlining Institute's Latino Issues Forum, Hispanics have been "victims"
of past telecommunications mergers.

"This is not to say that all mergers are bad,"
Gamboa said, noting that AT&T could improve TCI's allegedly poor customer-service
history.

But he added that AT&T should commit to contributing to
the universal-service program, which balances phone rates in rural and urban areas, and
that it should conduct "minority outreach" in hiring and deploying services.

Local governments have similar concerns, said Joni Inman,
president of the Greater Metro Telecommunications Consortium in the Denver area. She said
she's worried, for example, that the March 1999 deadline to end upper-tier cable-rate
regulation "opens the door for AT&T to raise rates."

She also said cities should be able to require AT&T to
maintain the same level of customer service and technical support before approving
transfers. In addition, she said, cities should be able to require open access to cable
wire in areas where cable faces no wireline competition.

The FCC should require that AT&T open its network to
third parties to increase data-service competition, said Charles M. Brewer, chairman and
CEO of MindSpring Enterprises.

Echoing arguments first raised by America Online Inc.,
Brewer said data competition will wane if cable isn't required to unbundle its
networks to competitors. "If we're going to have a competitive residential
market, we must have an effective way for multiple providers to share the wire into the
home," Brewer added.

FCC chairman William Kennard asserted that remarks by
executives at AT&T and TCI that any attempt by the FCC to require such unbundling
would jeopardize the merger appeared inconsistent. He said he was uncertain why such
requirements would jeopardize the merger if, in fact, the companies planned to maintain
"open" networks, anyway. "There's a contradiction there," he
added.

James W. Cicconi, AT&T's senior vice president for
government affairs and federal policy, responded that AT&T and TCI are simply worried
that any new rules would "seriously jeopardize" the economic models driving the
proposed merger. He said no one's even yet certain how fast consumers will warm to
broadband services. "To act on projections … strikes us as unjustified,"
Cicconi added.

Later, Kennard questioned how AT&T could resist
unbundling cable networks while opposing regional Bell operating company efforts to loosen
their own unbundling requirements. "I didn't hear you reconcile those two
arguments," he said.

Cicconi said AT&T believes that the Telecommunications
Act of 1996 distinguished between telco and cable networks in the area of unbundling. In
addition, he told Kennard that a combined AT&T and TCI would result in "more,
better and cheaper services. Consumers will have more choices than they have today."

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