Consumer groups say cable deal violates antitrust laws
August 17, 1999
Washington — Consumer groups are asking federal regulators to block AT&T’s bid to buy Denver-based MediaOne, saying the cable merger would give the company too much control in the markets for cable TV and high-speed cable Internet services.
Consumers Union, Consumer Federation of America and the Media Access Project joined Tuesday in opposing the deal on grounds that it violates existing antitrust laws and federal rules that restrict the number of cable customers a single company can control.
With such a large percentage of the market, AT&T could block new companies from getting into the cable business which already suffers from inadequate competition and high prices, say the groups. They fear the company would be able to hike cable rates even more.
”This is a failure to aggressively apply antitrust and competitive policy,” said Gene Kimmelman, co-director of Consumers Union.
Under an agreement announced in May, AT&T would acquire the nation’s fourth-largest cable TV company, MediaOne, and its 5 million cable TV customers. AT&T also would acquire MediaOne’s 25 percent stake in cable systems owned by Time Warner Inc., the nation’s largest cable TV company.
The deal would lead to AT&T, which recently took over the nation’s No. 2 cable TV company, Englewood-based Tele-Communications Inc., becoming the nation’s largest cable TV provider.
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According to an economic analysis by the consumer groups, AT&T would have a 57 percent market share of homes with its ownership stakes in various cable companies.
The Federal Communications Commission has a cap limiting a company’s share of total cable households at 30 percent, but the rule has not been enforced. The FCC is expected to review the ownership restrictions this fall.
AT&T spokesman Jim McGann disputed the consumer groups’ figures and said they are inflated.
Consumer advocates say even if AT&T spins off some of its smaller holdings, it will still hit the federal limit.
”We just don’t believe you can fiddle around at the edges of this and fix it,” said Mark Cooper, research director for the Consumer Federation of America. The groups have filed a petition asking the FCC to enforce its ownership rules, which they say would automatically block the merger.
Another petition filed with the Justice Department which has an ongoing review of the merger asks that the deal be halted for antitrust concerns.
AT&T asserts that the merger is in the interest of consumers. As part of the deal, AT&T has said it intends to enter the local phone market by delivering service over cable lines something attractive to Washington lawmakers and regulators who would like to see more players in that arena.
”It’s very surprising to see consumer leaders attack a merger that is so clearly intended to benefit consumers,” said McGann of AT&T. ”The whole point of AT&T’s acquisition of MediaOne is to offer consumers a choice in local telephone service.”
The consumer groups say increased local phone competition is not an adequate tradeoff for allowing AT&T to develop monopolies in the cable TV and high-speed Internet market.
Under the deal, AT&T would acquire MediaOne’s 50 percent management interest Road Runner, a major cable Internet services provider. Road Runner is the biggest competitor to At Home, in which AT&T now has a controlling stake through its takeover of TCI.