FCC Closing In on Cable Ownership

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Washington -- A Federal Communications Commission official
said last week that the agency is hoping to adopt new cable-ownership rules -- an issue
being closely monitored by AT&T Corp. -- at its Sept. 15 meeting.

Agency officials had planned to take up the cable rules two
weeks ago, but chairman William Kennard decided to move forward with new
TV-station-ownership rules instead.

FCC Cable Services Bureau chief Deborah Lathen said she was
hoping that a vote on new cable rules would occur next month, but she left open the
possibility that the date could slip.

Under FCC rules that are not being enforced, a cable
operator and its affiliates are barred from owning systems that pass more than 30 percent
of U.S. households, or roughly 30 million homes.

The U.S. Court of Appeals for the District of Columbia
Circuit is set to hear oral arguments Dec. 3 in Time Warner Entertainment's appeal of
the rule and constitutional challenge to the authorizing provision.

The FCC adopted the 30 percent cap in 1993, but the agency
declined to enforce it after a federal court ruled that the underlying statute was
unconstitutional.

FCC officials have said that under its rules, AT&T
would have access to 67 percent of homes based on its ownership of Tele-Communications
Inc., its pending acquisition of MediaOne Group Inc. and its minority interests in TWE,
Cablevision Systems Corp. and smaller cable companies.

AT&T claimed that after buying TCI and MediaOne, it
would wholly own systems with 16 million subscribers with access to 25 percent of U.S.
homes -- well below the 30 percent cap.

AT&T and the FCC disagree on how much minority
interests should count toward the 30 percent cap -- another issue the commission is likely
to consider Sept. 15.

AT&T insisted that the FCC's ownership-attribution
rules are too strict, and that noncontrolling stakes in TWE and Cablevision should not
count toward the cap, which the FCC adopted as a method of preventing one cable operator
from exercising too much control over programmers.

In comments to reporters, Lathen said "monopoly"
power -- the influence of one buyer in a market -- remained a major concern as the
commission wraps up its rulemaking.

In a July 30 letter to the FCC, AT&T and MediaOne
recommended three changes in the ownership rules.

First, they said the FCC should attribute ownership only
when an "MSO actually does or could control programming choices or purchase
programming." Under current rules, a 5 percent voting-stock stake is enough to
trigger attribution.

Second, they said instead of measuring a cable
company's reach based on a

percentage of homes passed, the FCC should base it on a
company's subscriber level as a percentage of all subscribers to
multichannel-video-programming distributors, including direct-broadcast satellite.

Third, they said the FCC should raise the 30 percent cap by
an unspecified amount.

AT&T and MediaOne said the changes, if adopted, would
be crucial to their "ability to expeditiously provide facilities-based local
telephone services in competition with the [incumbent local phone] monopolies."

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