Washington -- A bevy of competitors to AT&T Corp. and
Tele-Communications Inc. demanded last week that federal regulators impose strict
behavioral conditions in exchange for approving the long-distance carrier's takeover of
the cable giant.
Atop the list: America Online Inc., which is demanding once
again that the Federal Communications Commission force AT&T to unbundle high-speed
Internet-transport facilities from its affiliated Internet-service provider, @Home
"Notwithstanding their professed commitment to 'open
broadband,' the merger participants have made it plain that broadband consumers will 'have
to go through us' to get the Internet-service provider of their choice," AOL said in
an FCC filing last Thursday containing its merger-approval conditions.
AT&T spokesman John Heath said that after the merger,
AT&T would market @Home as a single product that subscribers would be free to use to
reach various competing content providers, such as AOL.
Heath said reports that AT&T chairman and CEO C.
Michael Armstrong's plan to market @Home as two distinct products -- access and content --
AOL chairman Steve Case, meanwhile, said in a speech here
last Monday that cable's basic business model -- its "DNA" -- does not favor
openness and competition. "If cable's DNA does not change, cable-broadband services
will never become a major Internet player, and the Internet will not reach its full
potential," Case said at the National Press Club.
Case also acknowledged that private negotiations are under
way with cable operators, which could lead to marketing alliances that help to speed
broadband-cable deployments. Case said he hopes that talks with MSOs and phone companies
lead to "win-win" solutions that allow AOL members to "upgrade" to
broadband in a seamless, affordable way.
"We believe that's possible, because the cable-modem
adoption has been OK, but a little slow," Case said, responding to a question.
"We do think that -- because it's fundamentally an upgrade market, to the extent that
we're trying to promote it to our members -- the adoption of cable broadband likely will
happen faster, which will allow cable companies to pay back their investment [in broadband
MCI WorldCom echoed AOL, saying that the FCC should impose
various common-carrier regulations on TCI's cable facilities to the extent that those
facilities are used to provide telecommunications services.
"There should be no regulatory distinction between
telecommunications services provided over cable facilities versus over the traditional
telephony infrastructure," MCI WorldCom said in its filing. It also urged the FCC
that cable lines owned by AT&T should not escape unbundling, interconnection and
resale obligations under the law.
Telcos, broadcasters, wireless and private cable operators
and public-interest groups each asked the FCC to address their specific concerns and to
adopt various safeguards to blunt possible anti-competitive conduct by the merged entity.
Regional Bell operating companies urged the FCC to impose
the same conditions on the AT&T-TCI deal as it did for other telco mergers.
U S West said the combined company should have to comply
with all of the rules that apply to local telcos, and that it must allow other phone
companies to interconnect with its networks and to resell its services. Allowing AT&T
and TCI to merge "will vest unprecedented market power in one large entity," U S
Similarly, SBC Communications Inc. stressed three issues in
its filing: that the FCC apply the same criteria to the TCI deal as it did in other
mergers; that TCI should be required to resell and unbundle its cable services to ensure
that competitors have equal access; and that TCI should divest its interest in Sprint PCS.
The National Association of Broadcasters, in comments filed
last Wednesday, said AT&T should promise to carry all digital-broadcast signals in
markets where AT&T has upgraded its systems. The association, however, did not provide
a definition of an upgraded system.
The NAB also warned that AT&T and TCI might attempt to
blunt Internet competition to cable programming by restricting Internet video streaming by
subscribers to @Home.
The association supported that claim by citing comments at
an FCC hearing Oct. 22 by TCI president and chief operating officer Leo J. Hindery Jr.,
who acknowledged that he imposed a streaming limitation on @Home.
"In other words, in providing Internet service, TCI
reserves the right to limit access to potentially competitive programming providers,"
the NAB said.
Cable sources have said, however, that @Home's 10-minute
cap on video streaming was primarily designed to conserve bandwidth, and not to protect
Cable attorney Paul Glist of Cole, Raywid & Braverman,
a law firm based here, said at last week's Eastern Show in Orlando, Fla., that the
Internet was too dynamic a medium for someone to argue plausibly that limits on video
streaming could act as an "artificial constraint" on video competition.
The trade associations that represent wireless cable
operators and private cable operators jointly urged the FCC to take a close look at the
post-merger structure of Liberty Media Group, which TCI chairman and CEO John Malone has
carved out as his programming domain.
They said the FCC should ensure that Liberty can't claim at
some point that because it has operational independence from AT&T's cable division, it
is not subject to FCC rules that require the sale of its programming to multichannel-video
distributors that compete with AT&T/TCI.
"It's pretty clear to us that they are setting up the
argument down the road that [Liberty] would not be affiliated [with AT&T], and we want
to nip that in the bud," said Paul Sinderbrand, an attorney based here who represents
the Wireless Communications Association International (WCA).
The WCA also asked the FCC to ensure that any Liberty
programming that is migrated from satellite to terrestrial delivery would continue to be
available to wireless cable operators and satellite-master-antenna-TV (SMATV) operators.
The Media Access Project -- a public-interest law firm
filing on behalf of the Consumer Federation of America, the Consumers Union and others --
echoed AOL's view that @Home subscribers needed nondiscriminatory access to ISPs.
"We believe that the model being used here threatens
the character of the Internet," MAP attorney Andrew Jay Schwartzman said.
Kent Gibbons contributed to this report.