Arming for Comcast-AT&T fight

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Consumer advocates are gearing up for a fight over a potential purchase of AT&T Broadband by Comcast Corp. Consumers Union, Consumer Federation of America and Media Access Project say they worry further consolidation in the cable industry will reduce consumers' choices and increase prices.

"We don't think this will make things dramatically worse for consumers, but this continued consolidation will lead to more power in fewer hands in the cable market," says David Butler, spokesman for Consumers Union. "Customers who continue to see prices shoot up year after year will continue to see prices shoot up."

Consumer advocacy groups worry they will have a much harder time convincing the administration, the antitrust agencies and the FCC to block or place conditions on big media mergers such as Comcast and AT&T Broadband.

"For us, the issue is whether the administration and the new FCC are simply going to stand on the sidelines as we face the possibility of going to a 40% ownership share in the cable industry," says MAP President Andrew Jay Schwartzman.

"We think it's clear the Bush Administration has given every signal that it's not going to be especially tough on business mergers," Consumers Union's Butler said.

FCC Chairman Michael Powell has said repeatedly that he believes the market should be left to work, with the government only stepping in if laws are broken. And FTC Chairman Timothy Muris takes a similar point of view, according to several of his published writings and testimony before the Senate.

Comcast President Brian Roberts hopes to take advantage of this pro-business climate, according to a letter he sent Sunday to AT&T Chairman C. Michael Armstrong: "We are confident that the combination does not present any significant regulatory issues," Roberts wrote.

Maybe so, but others aren't so sure. According to Roberts' letter, Comcast wants to buy AT&T Broadband's 13.5 million wholly-owned cable subscribers, "as well as your joint venture interests." Those interests include joint ventures in TWE, Cablevision and Rainbow. Comcast would achieve that by "assuming more debt and issuing more equity to reflect their values," Roberts wrote.

If Comcast were just to buy AT&T's 13.5 million base subscribers and add them to Comcast's 8.5 million subscribers, Comcast would own 22 million subscribers covering 25% of the pay-TV homes (including satellite TV) and 32% of cable homes, under or close to the FCC's 30% cable ownership cap. The DC Circuit Court of Appeals struck down that cap last February and the FCC plans to begin rewriting the rules next month. But 13.5 million subscribers is probably the lowest number Comcast would like to buy - almost 20 million more subscribers are included in AT&T Broadband's portfolio, thanks to interests in systems owned by Time Warner Entertainment, Cablevision, Insight and Adelphia.
If Comcast bought all AT&T's available systems, it would own interests in 41.7 million subscribers, which would cover 48% of the pay-TV market and 61% of the cable market. With the boom in satellite TV, the FCC considers DBS subscribers part of the multichannel universe, but 48% is still far above the FCC's former limit. Still, it's far below the court's suggestion that the number be closer to 60%, a number that often serves as a guideline for antitrust regulators. - Paige Albiniak

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