Regulators Fear Rate Hikes from Mergers


Santa Monica, Calif. -- Cable regulators are concerned that
recent mega-mergers -- such as the melding of MediaOne Group Inc. and Comcast Corp., and
Adelphia Communications Corp.'s acquisition of Century Communications Corp. -- will
lead to grossly higher rates for consumers.

Speakers at a regional meeting of the National Association
of Telecommunications Officers and Advisors here last week did not include AT&T
Corp.'s buyout of Tele-Communications Inc. in that classification.

AT&T should realize enough savings through the use of
cable's pipes for product delivery that it will not need to hike cable prices to
service debt and give shareholders decent returns, speakers said.

But for other buyers, purchase prices at 14 times cash flow
don't make financial sense, said attorney Bill Marticorena of Ruttan & Tucker, a
municipal consultant. "They're based on unachievable per-subscriber
revenues," he added.

"I don't think that his remarks contemplate the
underlying issues of the transaction," Randall Fisher, Adelphia's vice president
and general counsel, said after the panel.

"Without giving specifics, if you look at the ultimate
impact of leverage and the use of stock versus cash, and you examine the underlying
entities acquired, you find that in all of the major acquisitions, you have good
management and service of new products with a tremendous upside," Fisher added.

Regulators said they are excited about the potential of the
AT&T-TCI merger, citing AT&T's intent to bring local telephone competition to
many communities and its good service reputation.

"It's like BMW [AG] taking over Yugo," said
David Olson, director of cable and franchising for the Mt. Hood Cable Regulatory
Commission in Portland, Ore.

AT&T also has a better reputation in its dealings with
regulators, so officials said they hope to put an end to the TCI information "shell

The shell game means regulators requesting information from
a local affiliate being referred to corporate, which refuses the request because the local
system is the franchise signatory. Going forward, regulators said they will make AT&T
sign all franchise documents.

Convergence raises the specter of new problems for
regulators, such as the possibility of predatory programming pricing by mega-companies
like AT&T Broadband & Internet Services, or the loss of franchise revenue as
companies bundle and discount services.

Paul Valle-Riestra, assistant city attorney of Walnut
Creek, Calif., said cities should make it clear that if a telecommunications vendor opts
to give away free cable to boost its Internet and telephony sales, for instance, the
company will still be responsible for fees equal to those from paid cable subscriptions.