McCain to Watch Telecom Deals Closely

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Washington -- Senate Commerce Committee chairman John
McCain (R-Ariz.) said he'll take a close look at telecommunications mergers as a possible
first step toward deciding whether the landmark Telecommunications Act of 1996 needs to be
revised.

As a first step, McCain said last week he would ask the
General Accounting Office -- the investigative arm of Congress -- to evaluate the consumer
impact of major phone and cable mergers.

During a hearing he called on telecommunications
consolidation, McCain said the rapid pace of mergers since 1996 has made him worried that
the local phone industry could become "Bell East and Bell West," and AT&T
could become "Ma Bell, dominating the markets for voice, video, and high-speed data
services."

Sen. Ron Wyden (D-Oregon) gave McCain's growing unease with
the merger climate bipartisan support.

"I hope this is just the beginning of the effort by
this committee to examine the impact of mergers on our economy," Wyden said.

Over the next few months, McCain and Wyden plan to look
over the FCC's shoulder as it considers MCI WorldCom Inc.'s merger with Spint Corp.,
Viacom Inc.'s merger with CBS Corp. and AT&T's purchase of MediaOne Group Inc.

Federal Trade Commission chairman Robert Pitofsky told
McCain's panel that new legislation addressing mergers was unnecessary. He said many
recent mergers were driven by global competition and simply worded antitrust legislation
has worked well over the years.

But Pitofsky said the current merger wave was unique in the
sense that so many deals involve industry leaders. "I think that's a change from what
we saw 10, 20 years ago," he said.

The mergers reviewed by the FTC were worth $1.6 trillion in
1998, according to Pitofsky, a 10-fold increase over the value of deals the agency
reviewed in 1992.

The FTC's handling of Time Warner Inc.'s purchase of Turner
Broadcasting Inc. is an example of successful antitrust enforcement, according to
Pitofsky. The FTC has not received a single complaint from a programmer or a distributor
about Time Warner's compliance with the FTC's ruling, he said.

In that case, the commission promoted competition and
protected consumers by requiring Time Warner's cable systems to carry a rival to Cable
News Network, Turner's 24-hour news channel, he added.

Federal Communications Commission chairman William Kennard
agreed with Pitkofsky that new laws aren't needed. Instead, Kennard sought more
Congressional support for regulators that enforce current laws and protect the public
interest, especially with regard to big mergers.

In response to questioning from Wyden on Internet access
via cable, Kennard reiterated that the FCC's goal was to promote the deployment of
broadband facilities and to ensure as much as possible that competition between cable
operators and phone companies makes regulation unnecessary.

"If we find that consumer welfare is being undermined
in some way or consumers lack choice, we will have opportunities to step into that
marketplace and intervene. But I just don't think now is the time," Kennard said.

AT&T has based its objection to "forced
access" to its Internet facilities because it feels such a mandate would slow the
company's broadband investment. Kennard told Wyden he does not share that view.

"I would not dispute the fact that companies like
AT&T, I think, would go ahead and deploy broadband even if you had some sort of
open-access regime," Kennard said. "But I think the fundamental question is, 'Is
regulation necessary at this time?' "

Gene Kimmelman, Washington office co-director of the
Consumers Union, countered that rising long-distance rates for millions of low-volume
callers and increasing cable rates show that current laws aren't sufficiently protecting
consumers from large telecommunications and media companies.

"We have mega-merger mania and it needs to be
stopped," Kimmelman said. "I think you have to review this law. I think you have
to step in."

Relying on the FCC, he said, is a mistake. "I think
the FCC should take care of it, but it has not," Kimmelman said.

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