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DoJ to Review AT&T-Comcast Merger

The Department of Justice has begun a review of the AT&T-Comcast merger, precluding Federal Trade Commission (FTC) involvement in the proposed $40 billion deal that would create the nation's largest broadband provider with 22 million subscribers in eight of the nation's 10 largest markets. Under the Byzantine federal rules of merger approvals, either the FTC or the Department of Justice, but not both, review pending deals.

An FTC spokesman said the agency would neither confirm nor deny that FTC Chairman Timothy J. Muris had decided to let Justice handle the review, but FTC Commissioner Mozelle W. Thompson told InternetNews.com, "It's true, the Department of Justice will handle this review."

Department of Justice spokesperson Gina Talamona also confirmed that DoJ has begun the review. Eileen Connelly, a spokeperson for AT&T, said the company is working with the DoJ on the review and looks forward to answering any questions it may have about the merger. She said AT&T had applied to have the DOJ review the case from the outset rather than starting with the FTC.

Consumer advocates had favored an FTC review of the proposed merger that would create the nation's largest cable company, citing the agency's past experience in the AOL-Time Warner merger and voicing concerns that the Department of Justice is less bipartisan and less independent than the FTC.

"I'm disappointed with Chairman Muris' decision," Thompson said. "With our prior experience with open access issues, I felt we were well qualified to review the merger. Apparently, Chairman Muris felt otherwise."

Numerous groups, from ISPs to public advocacy groups opposed the AOL-Time Warner merger, warning that the deal would harm competing Internet service providers by blocking them from lucrative markets through a monopoly on the Internet's high-speed infrastructure. The FTC eventually required AOL-Time Warner to make its cable lines open to competing services.

These groups fear that the Department of Justice will not require a merged AT&T Broadband-Comcast meet the same requirements.

Jeffrey Chester, executive director of the Center for Digital Democracy, said, "The FTC is especially expert in media mergers involving new digital networks, as it demonstrated in the AOL TW review."

Chester added that the merger review will now be in the hands of a "politically appointed official who has shown, in the Microsoft case, that DOJ is unwilling to develop serious policy approaches to ensure open and competitive digital markets."

"We are concerned that this decision was not based on a careful deliberation of agency expertise, but rather was politically motivated," Chester said. "It's clear that Chairman Muris doesn't believe that the FTC should oversee mergers in the media and Internet fields. As a consequence, the public is losing the considerable expertise of the FTC in examining media-related mergers. Given the wave of expected consolidation in the media and telecommunications markets, and the importance of this sector to our economy and democracy, this is especially unfortunate."

Comcast beat out two rivals, Cox Communications and media titan AOL Time Warner, in the bidding for AT&T's broadband/cable unit. Comcast locked it up in December, after escalating its opening hostile bid from $44.5 billion to $72 billion.

The combined entity, which will be dubbed AT&T Comcast Corp., will merge Comcast's subscriber base of about 8 million, with AT&T Broadband's 14.3 million subscribers, creating the nation's largest cable provider.

When the deal was made, Laura Behrens, research analyst with GartnerG2, said she expected the merger would put pressure on cable providers, making them "feel that they need to get much bigger to survive."

She said that if the merger is approved, more consolidation is likely to follow.

"The niche players are going to have a hard time surviving," she said.