Public Shrugs as Ops Oppose Mergers

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Opponents of the $62 billion merger between SBC
Communications Inc. and Ameritech Corp. — including cable operators in three states
— have run into a wall of public apathy.

A recent survey revealed that 64 percent of consumers in
Ameritech's five states either have no opinion, or actually favor the transaction, despite
claims that it's anti-competitive and that it threatens the quality of phone service in
the region.

The results were a blow to AT&T Corp., as its pending
$48 billion deal for Tele-Communications Inc. would allow it back into the local loop in
some prime Ameritech markets, including Chicago and the affluent Detroit suburbs.

Meanwhile, cable operators in Ohio and Indiana are worried
that SBC's well-known aversion to competition could spell trouble for them down the line
if the deal goes through.

But how to make the industry's case is the problem.

Some said cable operators risk being labeled hypocrites for
opposing the SBC/Ameritech deal at a time when the cable industry is undergoing its own
round of consolidation.

"It's a difficult thing for cable companies to be
talking against, because when all is said and done, we have a lot of mergers out there,
too," one cable official said. "Who are we to say that mergers are bad? That
bigger isn't better?"

That argument is not lost on Ameritech, which accused
AT&T of advancing a self-serving argument at the same time that it's snatching up TCI.

"It's smoke and mirrors," Ameritech corporate
spokesman Dave Pacholczyk said. "AT&T, which is already larger than we are,
doesn't want a company of similar size being created. Why would they not want to slow it
down? A formidable competitor would come out of this."

Commissioned by AT&T, the survey of 1,304 consumers was
conducted by Peter D. Hart Research Associates and Hill Research Consultants. It found
that 44 percent of respondents across Ameritech's service territory had no opinion
concerning the merger, while 20 percent supported it. The remaining 36 percent were
opposed.

Not that it was all bad news for cable.

After hearing arguments for and against the merger, 50
percent were opposed to the transaction, with 26 percent of those "strongly"
opposed.

Apparently driving those numbers was the belief that access
charges imposed by telcos on carriers like AT&T amount to hidden taxes that keep
long-distance charges artificially high.

The result was that 72 percent of respondents said SBC
should be forced to lower its access charges before it's allowed to snare Ameritech.

"If people are made aware of the issues — if they
know about the impact and the ramifications — you see an automatic spike in the
numbers," said Gary Mack, executive director of the Illinois Partnership for Fair
Telecommunications Policy, a Chicago-based coalition with members including the Illinois
Cable Television and Communications Association.

Not surprisingly, Chicago will likely be a prime market for
AT&T, which figures to target a 1 million-subscriber cluster that TCI has put together
through a series of acquisitions.

AT&T argued that it's "apples and oranges" to
compare its merger with TCI to the marriage of two monopolies like SBC and Ameritech.

"We have competition in our markets. SBC and Ameritech
have virtually none," said Mike Pruyn, a Chicago-based AT&T spokesman.
"There is no question that AT&T-TCI is designed to gain a footprint in the local
market. But it's because we've discovered that reselling the incumbent's service is a
money-loser."

SBC responded with a statement from its San Antonio
headquarters two weeks ago, in which it accused opponents of attempting "to protect
their markets from competition by misleading the public about the SBC-Ameritech
merger."

But as AT&T trades barbs with the regional Bell
operating companies in Illinois, cable operators elsewhere are putting the heat on
regulators in states with the authority to scuttle the Ameritech-SBC merger.

Operators in Wisconsin and Michigan are sitting this one
out, since their state regulators have no authority to reject the deal.

But Time Warner Cable is arguing before the Public
Utilities Commission of Ohio that Ameritech continues to thwart competition by using
monopoly assets to subsidize its unregulated Ameritech New Media cable subsidiary.

The PUCO barred the telco from an earlier practice of
offering vouchers for discounted phone service to Ohio consumers who signed up for ANM
service. Now, Ameritech is withholding its new customer list from Time Warner in order to
steer those customers toward ANM, cable executives insisted.

Ameritech officials responded by accusing Time Warner of
raising an issue that had "long since been resolved."

Pacholczyk said the MSO's beef was "old news,"
since under the Telecommunications Act of 1996, the RBOC is only required to provide its
new telephone-customer lists to entities that publish directories.

"We're talking telecom operations: They're talking
cable," he said. "They're two separate things. We've got to resist the
temptation to turn this into the world's largest complaint case. This is a merger at the
holding-company level — not a basket where you throw in everything that you
can."

AT&T still needs to find a way to reach the remaining
two-thirds of the nation's households not passed by TCI. Sources have said that AT&T
and TCI will seek joint ventures with other MSOs to reach some homes. Observers also
believe that AT&T is not finished buying MSOs.

Time Warner is getting an assist before the PUCO from Time
Warner Telecom, a competitive phone-service provider that is worried that SBC might
scuttle an interconnection agreement with Ameritech that allows it to offer local phone
service to businesses in Columbus and Cincinnati.

Marsha Schermer, Time Warner Telecom's vice president of
regulatory affairs, said the AT&T survey indicated that consumers are not indifferent
to the perils of the SBC-Ameritech merger, but rather, that they are "unaware of the
potential for mischief in the market."

Schermer wants Ohio regulators to question recent
SBC-Ameritech filings that insisted that the merger will produce $1.4 billion in savings,
without impacting the combined entity's service quality.

"With no change at the operating-company level? I
haven't seen any explanation of how they're going to do that," she said. "But if
they can, they should show the federal government, or every other business in the country,
how to do it."

Meanwhile, Indiana cable operators will intervene in a
recently launched investigation of the merger by the state Utility Regulatory Commission.

While not openly opposing the merger, operators were
nevertheless concerned about SBC's reputation for undermining competition in its markets,
said Indiana Cable Television Association executive director Dorothy Hancock.

An obvious target for SBC would be the industry's existing
pole-attachment and joint-trenching agreements with Ameritech, she added.

"We're talking about pole-attachment rates and the
cost of making ready," Hancock said. "We haven't been at odds with Ameritech in
the past, and we want to make sure that we're not at odds in the future." MCN

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