View from D.C.: Less than Awed by AT&T

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Washington -- Despite being rich, powerful and blessed by a
brand name with global sizzle, AT&T Corp. is committed to joining a cable industry
that is less than awed with the telecommunications giant's Washington lobbying skills
and business acumen of the past few years.

And it's just not cable folks who share the view that
AT&T's missteps must be corrected.

"It's been a source of considerable comment that
the quality of AT&T's lobbying is way, way down from what it once was," said
a source at the Federal Communications Commission.

Overall, reaction to the deal here was guarded, as
lawmakers and regulators expressed the hope that it would finally lead to local telephone
competition and not hurt cable competition.

Greg Simon, a former senior adviser on telecommunications
policy to Vice President Al Gore, said he hopes that AT&T chairman C. Michael
Armstrong's reputation for tenacity will turn his new acquisition,
Tele-Communications Inc., into a local phone competitor.

"The whole benefit of Armstrong is that once he gets a
plan, he sticks to it," Simon said. "[Former AT&T chairman Robert] Allen had
five or six plans, and the result was that they had no plan."

While saying that an ally with the resources of an AT&T
is always welcome, cable lobbyists nevertheless suggested that the company and its
long-distance-industry brethren fumbled their case before the lawmakers who wrote the
Telecommunications Act of 1996.

The long-distance players, for example, botched a
direct-mail pitch to House members. It turned out that some people hadn't given their
consent to be included, and one lawmaker revealed that one letter came from a constituent
who was dead.

Although AT&T and MCI Communications Corp. roped in
high-profile names -- like former Senate Majority Leader Howard Baker and former White
House press secretary Marlin Fitzwater -- as hired guns, cable lobbyists and FCC sources
said the long-distance companies were outflanked by the Baby Bells.

One FCC source added that the imbalance exists today.

"I am kind of comparing them to the [Baby Bells], and
the [Baby Bells] are just really formidable," the source said.

An FCC source said that even though no Baby Bell has been
allowed to compete in long distance, the tide is shifting -- in part because AT&T has
been less than vigilant in tracking down FCC officials about ensuring that local phone
markets are open before the Bells enter long distance.

Like Simon, the source said Armstrong could turn the
situation around.

"Michael Armstrong has a much better touch with the
commission than Bob Allen did," the source said.

AT&T's credibility could make or break the deal
with FCC officials.

"As we look at this transaction, I personally want to
see whether AT&T is committed to investing in advanced facilities and competing
head-to-head with local phone companies to provide high-speed voice and data to the
home," FCC chairman William Kennard said.

The FCC's role in approving the deal requires the
transfer of TCI's microwave licenses to AT&T and possibly the transfer of
AT&T wireless-phone licenses to the new corporate entity being created. The FCC could
block the deal if it decided that it would not serve the public interest.

"If the proposed combination of AT&T and TCI can
demonstrate that it will provide robust competition in the local telecommunications market
for the benefit of consumers, that would be a big plus," FCC commissioner Susan Ness
said.

Reaction from Capitol Hill was mixed. Senate Commerce
Committee chairman John McCain (R-Ariz.) issued a statement blaming the Telecommunications
Act of 1996 for promoting mergers instead of competition.

Rep. Billy Tauzin (R-La.) said he supported the merger, but
he was concerned that it would not advance cable competition.

"I am not saying that's a reason not to approve
the merger: I'm just saying that's a cause for some concern," Tauzin said.

Robert Sachs, a former vice president of MediaOne Group,
who left to become a private cable consultant, said he was puzzled by Tauzin's
reaction because cable/long-distance alliances were expected by Congress -- or at least
not ruled out.

"I think that this is the best chance of there truly
being facilities-based competition of any deal that has occurred since the '96
Act," Sachs said. "I don't believe that anybody realistically saw the
long-distance companies as potential competitors to the cable companies."

Joel Klein, the Justice Department's chief antitrust
enforcer, said he would attempt to block the merger if would not produce consumer
benefits.

House Commerce Committee chairman Tom Bliley (R-Va.) said a
tough antitrust review was unnecessary, "because we desperately need competition in
the local loop. This kind of merger will provide that kind of competition."

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