By Erin Joyce
AT&T Broadband and Comcast Corp. , say they are willing to open their cable lines to competing Internet Service Providers as part of their plan to merge their operations into the nation’s largest cable provider.
“AT&T Comcast is fully committed to negotiating mutually beneficial service agreements with Internet service providers (“ISPs”) so that its cable customers will have a choice of ISPs,” the companies said in a regulatory filing detailing the kinds of services the new company would offer its 22-plus million customers.
The offering was contained in hundreds of pages of documents made public Friday by the Federal Communications Commission. In the documents, the companies lay out their argument that the $72 billion marriage would accelerate the deployment of facilities-based broadband and cable telephony services, as well as digital video services, without becoming anti-competitive.
By uniting the two systems “with remarkably complementary assets, this merger will bring more digital services and features to more Americans more quickly, and will therefore serve the public interest.”
In addition, the companies said the merger will deliver benefits to consumers by stimulating the production and delivery of local and regional programming.
More significantly, the companies said the merger would not result in any violations of the 1996 Telecommunications Act (which was in part designed to promote competition and choice for consumers), or the FCC’s rules.
The commission’s rule change would reclassify broadband via cable modem as an “information service,” and essentially free the cable industry from regulations applied to “telecommunications services,” including making access to their lines available to competing Internet service providers.
FCC Chairman Michael Powell is supporting the rule change as a way to fast track greater broadband deployment across the nation.
Already, groups such as the Media Access Project (MAP) have filed a lawsuit against the FCC over its decision, which would free cable operators from provisions of the Telecommunications Act.
The suit challenging the decision was filed on behalf of the Consumers Union, the Center for Digital Democracy and the Consumer Federation of America, its three citizens groups.
Opponents of the FCC’s rule change charge that it would replicate all of the problems that monopoly cable television service has brought to the public over the years, namely lack of choice for consumers.
Phone providers such as Verizon Communications are also up in arms about the rule change, saying in a petition that the rule change is arbitrary, given that phone companies have to provide “open access” to ISPs.
Both AT&T and Comcast say they have conducted trials to explore “the issues” associated with multiple ISP arrangements and are separately negotiating to reach commercial agreements with unaffiliated ISPs.
Comcast has already announced cable access deals with ISP United Online, which is using its lines to provide service in Indianapolis and Nashville. Comcast has 467,000 cable subscribers and 77,000 high-speed Internet subscribers in those markets. UOL and Comcast have also said the service could be extended to other markets.
AT&T Broadband recently opened its lines to ISP Earthlink in an access deal that will begin rolling out cable Internet services in Seattle by mid-summer.
Comcast serves about 8.4 cable subscribers and also holds a general partnership interest in high-speed Internet access service, electronic commerce, video programming and other services. Its interactive TV services are now in front of over 40,000 customers, and over 4,000 business and government customers are integrated broadband communications customers. In addition, Comcast holds interests in several regional and national video programming networks, and owns various sports teams and arenas.
AT&T Broadband counts about 13.4 million customers on its cable network throughout the US. The broadband unit also holds a stake in cable systems that includes AT&T Broadband’s 25.51 percent limited partnership interest in Time Warner Entertainment, which serves 12.8 million cable subscribers on systems that it owns or manages.
AT&T said it is firmly committed to completing the sale of its limited partnership interest in TWE.
“In particular, it bears emphasis that AT&T Comcast will serve less than 30 percent of the nation’s multichannel video programming distribution (MVPD) customers,” the national limit on percentage ownership in markets that was recently reversed by regulators.
However, “[t]hat calculation does not include the customers served by the Time Warner Entertainment and Time Warner cable systems” in which AT&T will holds a stake.
“Comcast and AT&T Broadband provide services to consumers in different local markets, and, therefore, their union will not affect horizontal concentration in any relevant market. Further, the combined entity will not have either the ability or incentive to exercise buyer or seller market power in any relevant market.”
The companies said there is currently no separate market for high-speed Internet services for three reasons.
“First, high-speed service is priced competitively with dial-up, narrowband service. Second, consumers use both narrowband and high-speed Internet service for the same core applications. Third, at least for the present, all Internet service suppliers (both high-speed and dial-up) will be competing for the same mass market of Internet customers, the vast majority of which currently subscribe to narrowband services.”
The FCC said interested parties may file comments or petitions to deny the applications no later than April 29, 2002 and that oppositions or responses to these comments and petitions may be filed no later than May 14, 2002.
