Warning on mega mergers

Public advocates fear government is ignoring creation of media colossus'

Like skeptical scientists in a 1950s horror flick, government officials are ignoring the "conjoined media colossus" forming in the broadband economy's primordial stew, public advocates warned last week.

Before it's too late, they want the FCC to combine the pending reviews of the cable industry's mega mergers-AT & T Corp.-MediaOne Group and America Online-Time Warner Inc.-and stop them from forming a two-headed behemoth that threatens competition for cable, programming and Internet services.

"The commission cannot fully consider the effects of either ... merger on the relevant markets and on each other with certainty unless it has all four parties before it," wrote Media Access Project (MAP) and other groups joining in a motion to regulators.

To justify a combined merger review, MAP noted that AT & T told the FCC last week that it could not certify subscriber numbers, provided to regulators on April 7, for cable partner Time Warner Entertainment. TWE's subscriber level could be critical to the outcome of the AT & T-MediaOne merger if the FCC rules that subscribers attributable from the partnership count toward AT & T's national ownership cap. Under new FCC rules, one company's share of U.S. multichannel subscribers is limited to 30%.

After a terse exchange of letters between AT & T officials and FCC Cable Bureau Chief Deborah Lathen the week of April 3, the company told her office that TWE has 9.41 million subscribers but cautioned that it could not verify another company's customer figures.

Future efforts to examine the interconnection of the four companies will be stymied if the AT & T-MediaOne deal, which is much further along, is approved, MAP warned. "The commission will have no way to compel AT & T to provide information necessary" to both merger reviews, the group added.

Of particular worry to public advocates is heightened concentration in the cable and telephone Internet businesses. Through TWE and their cable broadband partnerships, the merged companies would be a united front reaching more than two-thirds of U.S. homes and combining the largest narrowband and high-speed Internet service providers.

Furthermore, AT & T would have control of 90% of the nascent high-speed cable broadband market because of its existing stake in Excite@Home and the acquisition of an investment in MediaOne-Time Warner cable modem partnership RoadRunner.