St. Paul Blesses AT&T-MediaOne Deal


The city of St. Paul, Minn., has become the final local
franchising authority in the state to approve the proposed merger between AT&T Corp.
and MediaOne Group Inc.

At its meeting last Wednesday, the City Council voted 7-0
to approve a staff proposal transferring 50,000 MediaOne cable subscribers to AT&T in
exchange for concessions addressing service problems that cropped up last summer.

Approval by St. Paul -- the 89th local government in the
Twin Cities area to approve a transfer -- essentially completes the AT&T/MediaOne
merger in Minnesota, where the state Public Utilities Commission has already blessed the

But before it signed off on the transfer, the city
negotiated an agreement under which MediaOne will provide each of its subscribers with a
free pay-per-view coupon, valued at $4, for a total cost of some $200,000.

The coupons are meant to compensate consumers for service
problems that caused the city to issue a notice of violation against MediaOne last summer
for not answering 90 percent of all inbound service calls within 30 seconds, as required
by National Cable Television Association guidelines.

St. Paul director of research Gary Stratham said the
agreement also contains new customer-service-reporting guidelines, as well as a clause
calling for liquidated damages of up $200 per day for failure to comply.

"And AT&T has agreed not to dispute the damages or
to reduce the number of customer-service representatives in St. Paul," Stratham said.

The city also retains the right to revisit the
controversial open-access issue at a later date. "It's a reservation of rights that
allows them to revisit the issue in the future if they think they have to," MediaOne
spokesman Brian Dietz said, adding that many of the MSO's transfers in the Twin Cities
area contain the same clause.

"Obviously, we don't think we're going to have this
conversation down the road, because we haven't seen any interest on the part of local
governments to regulate the Internet," Dietz added.

This doesn't necessarily mean the issue has gone away in
Minnesota. The PUC is currently investigating whether it has the authority to require
AT&T to unbundle the high-speed cable platform it is acquiring from MediaOne.

Gov. Jesse Ventura, meanwhile, proposed shifting authority
over cable from LFAs to the PUC and requiring operators offering phone service over cable
to be regulated in the same manner as the state's incumbent telephone companies.

This would require cable to interconnect with competitors,
essentially providing open access to all comers.

Industry executives also worried that authority over cable
won't shift completely to the PUC, leaving the industry under both state and local