FCC Ownership Rules Detailed

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Washington -- The Federal Communications Commissionreleased new details last week explaining the steps that AT&T Corp. needs to take todemonstrate that its future stake in Time Warner Entertainment should not count againstnational ownership limits.

Under rules adopted Oct. 8, the FCC indicated thatAT&T's pending stake in TWE's 9.7 million subscribers would not count ifAT&T can show that it is not materially involved in the video-programming activitiesof TWE. AT&T would get 25 percent of TWE from MediaOne Group Inc., which it is buying.

That could be a tough hurdle to clear becauseAT&T's semiautonomous Liberty Media Group, run by AT&T director John Malone,sells programming to TWE. Furthermore, AT&T has an ownership stake in Rainbow MediaHoldings Inc., another TWE supplier.

In the new rules, the FCC said AT&T would have to filea certification containing "facts, e.g. in the form of documents, affidavits ordeclarations, that demonstrate" no material involvement in TWE programming decisions.

Although FCC sources have said that ownership of a supplierwould not allow AT&T to insulate TWE, AT&T leaders who pushed for the change saidthey believe they can meet the FCC's new standard.

With the MediaOne deal, AT&T would have complete orpartial ownership of at least 29 million subscribers -- 5 million more than allowed underFCC rules.

If AT&T insulates TWE, its cable-subscriber-ownershiplevel would drop to 19 million, allowing the MSO to buy more cable systems

Scott Cleland, a telecommunications analyst with Legg MasonWood Walker's Precursor Group, said the FCC produced complex rules that will takelawyers and accountants to sort out.

"These rule look like IRS [Internal Revenue Service]tax rules, which no mere mortal can understand," Cleland added.

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