To divest or not to divest is not the question. The question is how long AT & T will have to come into compliance with the government's cable ownership cap, say sources familiar with the FCC's review of the company's $70 billion merger with MediaOne.
The FCC's five commissioners are debating whether to give AT & T six months to comply with the 30% cap on national cable audience reach, as recommended by the agency's Cable Services Bureau, or give it up to a year.
The bureau has urged the commissioners to order AT & T to either sell its 25% stake in Time Warner Entertainment or to sell investments in programmers Liberty Media and Rainbow Holdings, which sell cable channels to Time Warner. After merging with MediaOne, AT & T cable systems will reach 41% of U.S. multichannel subscribers.
The commission's decision is expected by the end of the month.
AT & T opposes the divestiture order, but appears to have lost that argument and is trying to get as much time as possible to complete a sell-off.
Among the three Democratic commissioners supporting the strict divestiture order, Commissioner Susan Ness is the most amenable to a longer grace period, say sources familiar with the talks. Inquiries to her office this week have not been returned.
AT & T officials, who have asked for an 18-month deadline for mandated sales, say 12 months is the minimum time that can be justified. "AT & T is simply asking for the same policy applied to previous mergers to be applied in ours. We have given significant assurance of safeguards during the waiver period," said a company spokesman. AT & T is said to be pointing to the recent 12-month grace period for station sales granted in the Viacom/CBS approval as justification for a year-long waiver in its case.
To convince the FCC that a lenient waiver period is warranted, AT & T made some promises (see box, below).
But consumer groups, worried AT & T will cut preferential carriage deals with its programming investments on Time Warner systems if given too much time, say they will demand a judicial review of any grace period longer than six months.
"A 12- to 18-month waiver enables AT & T more time for leverage in programming contract negotiations between Liberty and Time Warner," said Andrew Schwartzman, president of Media Access Project.