Zeglis to Cities: Were Committed

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AT&T Corp. has begun wooing municipal regulators, as it
will need their goodwill once it completes its $48 billion acquisition of
Tele-Communications Inc.

As a first step, AT&T president John Zeglis spoke at
the recent National Association of Telecommunications Officers and Advisors conference in
San Diego, where he vowed to honor all commitments contained in existing TCI cable
franchises.

"So for anybody who's been wondering, let me
assure you right now that if you're dealing with somebody in TCI who is responsible
for local franchise agreements and commitments, none of those change," Zeglis told
the NATOA gathering. "The people stay in place, and so do the commitments."

When pressed, Zeglis was even more emphatic, promising that
all obligations remain "in place and untouchable."

That was enough to prompt one skeptic to remark,
"He'll live to regret that statement. People are going to hold him to it."

TCI, meanwhile, remained baffled last week by a seemingly
nonexistent controversy over its plans to only seek transfer consents from municipalities
with franchises containing change-of-control language -- a standard industry practice.

As of late last week, a combined 4,000 Federal
Communications Commission Form 394s and informational letters had produced just eight
questions from local authorities.

"And for those few communities that have shared their
questions, we've responded," TCI spokeswoman LaRae Marsik said. "And
overall, we've found excitement and optimism to be more evident than concern."

The MSO contended that local agreements with "transfer
language" don't require municipal consent, since all franchises will remain with
TCI once the deal is completed.

"We hope and expect that if there are any concerns
about the consent issue, cities will talk with us to work through them, and not litigate
them," Marsik said.

Generally, support for AT&T's acquisition of TCI
appeared to be running high at the NATOA conference.

"I haven't talked to anybody who doesn't
want this deal to go through," said Nick Miller, a partner with Washington,
D.C.-based law firm Miller & Van Eaton.

Nevertheless, observers said, local regulators are drifting
into one of three camps:

• Those eager to substitute AT&T for TCI;

• Those worried that TCI's transfer policy leaves
them holding the bag over unresolved franchise issues with the MSO; and

• Those worried about whether AT&T really wants to
be in the cable business, or whether it simply sees TCI as the quickest route back into
the local telephone market.

"Some wonder whether AT&T will respect their
franchises. Or is this just a telephone play, with AT&T looking for a trapdoor once
it's taken over the facilities?" asked one industry follower.

Zeglis tried particularly to reassure those in the second
category.

"If somebody says that the franchise agreement
requires a transfer approval, even though the system or license isn't being sold --
just the parent of a parent of a parent changing control -- we'll sit down and look
at the language and, if it's required, we'll go through the process," he
said.

David Olson, director of franchising in Portland, Ore.,
said Zeglis took an important first step by agreeing to listen to individual cities.

"I'm encouraged by that, because it's
appropriate," Olson said. "But the high road would be that if they're so
confident about the benefits of this deal, if they're so proud of it, why not go the
last step and submit it for approval?"

But for St. Louis regulators, whose approval will not be
sought, the speech provided little reassurance.

"I didn't hear anything that made me believe that
it's any more than the same old TCI line: 'We're going to tell you what
your ordinance says,'" St. Louis cable administrator Susan Littlefield said.

Littlefield added that she detected a "lack of
awareness of just how far TCI's service has to improve," which is an oversight
that could endanger some franchises at renewal -- a time when regulators will be able to
look at the local system's entire service history, and not just its record since
AT&T took control.

Olson agreed that based on TCI's position, AT&T
will not have a basis for a "clean-slate" argument when it comes time to account
for the MSO's service problems.

"They can't have a clean slate if there was no
transfer," he said.

Miller said some franchising authorities could take action
if they are not included in the transfer process, but he added that it's still early
in the game.

"But why wouldn't they?" he asked.
"We've seen it before. Now exactly how many will, who knows?"

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