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AT&T Gets Conditional Approval for MediaOne Buyout

AT&T's $58 million buyout of cable-television company MediaOne Group has received conditional approval from the Department of Justice.

To resolve antitrust concerns, the DOJ required the phone giant to sell its interest in broadband Internet access provider Road Runner for the union to come to fruition.

AT&T had agreed to merge with MediaOne last year in a deal that will make it the largest cable TV company in the United States. However, critics opposed the merger, saying it would give AT&T too much control over the cable TV and cable Internet business.

AT&T presently holds a controlling interest in Road Runner's chief rival Excite@Home.

In its complaint, filed yesterday in U.S. District Court in Washington, D.C., the DOJ agreed that the combination of AT&T's interests in Excite@Home and MediaOne's interests in Road Runner would substantially lessen competition in the aggregation, promotion and distribution of broadband content. At the same time, the Department filed a proposed consent decree that, if approved by the court, would address the Department's competitive concerns and resolve the lawsuit.

"The merger, as proposed, would have had an anti-competitive impact on the emerging broadband market," Assistant Attorney General Joel Klein, who heads the DOJ's antitrust division, said in a statement. "The divestiture assures that AT&T will not acquire undue leverage in its dealings with broadband content providers, and American consumers will be the ultimate beneficiaries."

The DOJ requires that AT&T sell MediaOne's stake in Road Runner within the next 18 months. MediaOne and Time Warner are joint owners of the service along with minority partners Compaq Computer, Microsoft and Advance/Newhouse.

Until that time, AT&T will be required to keep management of Road Runner separate from the rest of the company.

AT&T will be allowed to keep assets that are used primarily for providing cable Internet service and to move Road Runner subscribers to the Excite@Home service.

Sandy Colony, vice president of corporate communications for Road Runner, notes that contrary to some reports, her company is not the loser in this deal. "In the broader perspective, this is not bad news," she said. "We all know we are working toward an open-access environment. This changes the timetable, not the outcome."

In the long run, she said, AT&T will have to sit at the table with Road Runner's partners, Time Warner and Microsoft , and discuss the future. "Our goal is to negotiate nonexclusive affiliate agreements with all of the AT&T properties," she said.

Road Runner may be a good company for Microsoft to snatch up, suggested Keith Kennebeck, an analyst with the Strategis Group. "A company like Microsoft would be perfect," he said. "It is not a cable operator nor is it a high-speed Internet provider. They have a dial-up network and it has announced its intention to get into broadband deliveru and Internet access. This could be a good idea for Microsoft."

However, Michael Harris, president of broadcast research firm Kinetic Strategies, dismissed the idea. "I don't think that AOL or Time Warner would allow that," he stated.

He predicts that Road Runner will become a broadband unit service of AOL.

AT&T also is required to obtain prior approval from the DOJ before entering into certain types of agreements with Time Warner or with AOL, which has a pending merger agreement with Time Warner. That requirement, which would remain in place for two years after AT&T exits Road Runner, would apply to any agreement that jointly proposes to provide a residential broadband service or, any agreement that would prevent either party from offering a residential broadband service to customers in any geographic