FCC Keeps Freeze on AT&T Conditions

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AT&T Corp. will not have to comply with MediaOne Group Inc. merger
conditions calling for asset sales while the Federal Communications Commission
considers whether to establish new cable-ownership rules, the agency said
Tuesday.

In a unanimous ruling, the FCC said it was appropriate to continue the
suspension of the AT&T-MediaOne merger conditions given the agency's ongoing
effort to create cable-ownership rules that can withstand court review. The
commission is many months away from adopting new rules.

The Consumers Union, the Consumer Federation of America and the Media Access
Project have urged the FCC to hold AT&T to the merger conditions despite a
court decision that vacated key portions of the rules.

The commission said its ownership rules and the merger conditions were too
closely linked for it to enforce merger conditions that were based on rules that
have now been declared invalid by a federal court.

AT&T had been required to sell cable systems or programming interests
under an FCC order approving its acquisition of cable MSO MediaOne. The FCC
issued the asset-sale order on the basis that the merger would violate the
agency's limits on cable-system ownership.

After the FCC approved the merger but before AT&T was required to comply
with the asset-sale mandate on May 19, 2001, a panel of the U.S. Court of
Appeals for the D.C. Circuit tossed out the FCC rule capping cable ownership at
30 percent of all pay TV subscribers.

About two weeks later, reacting to the court's decision, the FCC decided to
suspend the asset-sale requirement so it could examine the relationship between
the merger conditions and the court's ruling.

The consumer groups also urged the FCC to conduct another review of the
AT&T-MediaOne merger not with regard to compliance with the now-stricken 30
percent cap, but with regard to compliance with the FCC's broad public-interest
mandate.

On Tuesday, the commission said it would not grant that request, repeating
that the prudent step would be to suspend the merger conditions while working on
new ownership rules.

Although the FCC's decision largely supported the position taken by AT&T,
the agency did not go so far as to agree with AT&T that the court's decision
should be read to mean that AT&T is now in compliance with the merger
conditions.

On its own, AT&T has taken several steps that would appear to meet some
of the merger conditions, including the spinoff of Liberty Media Group, the sale
of most of its stock in Cablevision Systems Corp. and attempts to divest its
25.5 percent stake in Time Warner Entertainment.

Democratic commissioner Michael Copps supported the agency's decision, but
reluctantly. He said that although he sympathized with the consumer groups, the
preferable course was for the FCC to act on new ownership rules.

'We must, however, remain cognizant that as time continues to pass,
suspension of compliance with these conditions becomes tantamount to their
elimination,' Copps said in a prepared statement.

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