MSOs Seek AT&T-BellSouth Conditions

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Five major cable companies Wednesday asked for conditions on AT&T’s merger with BellSouth to ensure that the combined phone giants can’t discriminate against cable’s competing digital-phone service.

The cable companies seeking conditions were Advance/Newhouse Communications, Charter Communications, Cablevision Systems, Cox Communications and Insight Communications. Each has introduced voice over Internet protocol to cable subscribers.

The cable MSOs said in a letter to the Federal Communications Commission that some of the conditions they want should apply to all cable VoIP providers, meaning cable’s biggest players -- Comcast and Time Warner Cable -- would benefit without actually having to take a public position at the FCC.

AT&T’s takeover of BellSouth would make it by far the dominant local phone company in the United States, with 70 million access lines, prompting the cable companies to call for conditions that would protect new voice entrants’ ability to compete.

“AT&T has the incentive and ability today to discriminate against cable’s voice service to retain its own voice customers,” the cable operators said.

AT&T spokesman Michael Balmoris noted that cable’s introduction of VoIP has been an unqualified success.

“The facts contradict these hypothetical charges. Just last week, the cable industry was ballyhooing the growth in their VoIP subscribers in referring to their 6 million customers,” Balmoris said. “I’m reminded of the cable industry’s oft-repeated line, ‘This is a solution in search of a problem,’ unlike the cable industry’s refusal to air ads of their competitors advocating video choice.”

He added, "Given the steady rise in subscribership for cable voice services, the clear evidence is that the cable companies are competing against wireline providers quite effectively, and their allegations to the contrary are unfounded." 

In a Sept. 27 letter, the MSOs dwelled on VoIP-interconnection issues. Because VoIP has not been legally classified a telecommunications service, it has no interconnection rights, forcing cable companies to work through third parties to exchange traffic with AT&T.

“Requiring AT&T to offer fair and efficient interconnection to its cable competitors can mitigate likely harms resulting from the merger,” the MSOs said.

The cable companies explained that their VoIP service had to be robust because discriminatory treatment by AT&T would undermine the voice-video-data bundle that cable wants to market.

“By harming cable’s voice product, AT&T can knock out one element of the bundle, making it less attractive to consumers,” they added.

In March, AT&T announced the $67 billion BellSouth deal, which, if approved, would add nine states from Kentucky to Florida to AT&T’s U.S. footprint. The FCC could vote on the merger in October. The Justice Department’s review is ongoing.

Art Brodsky, a spokesman for Public Knowledge, said the MSOs’ fears about AT&T echoed the view of Google, Yahoo! and eBay about potential discrimination by cable and phone broadband-access providers.

“We note the irony in cable's complaint about possible discrimination by AT&T,” Brodsky said. “We hope their participation in the merger proceedings is an enlightening experience for them that may cause some adjustment in the industry's policy goals.”

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