FCC Approves AT&T-TCI Merger

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February 17, 1999 (3:45 PM EST)

By Mary Mosquera,

The Federal Communications Commission approved unanimously AT&T's $48 billion purchase Wednesday of leading cable operator Tele-Communications Inc., creating for consumers one-stop shopping for long distance, Internet access, cable television, and eventually local phone service.

The federal regulator's endorsement -- coming just hours after shareholders blessed the merger -- was the last major stumbling block. The Justice Department and a variety of states and municipalities had already given their go-ahead.

The FCC voted 5-0 for the merger and attached no major conditions to the combination, such as requiring AT&T to open the cable network for lease by competitors as the regional Bell phone carriers do.

Because high-speed Internet deployment was still in its early stages, the FCC said it would be imprudent to impose such requirements. It did require AT&T to transfer TCI's stake in Sprint PCS as already agreed to Liberty Media Group shareholders.

"I am optimistic because the combined resources of AT&T and TCI surely will generate a very substantial effort to expand the choices now available to residential phone subscribers in TCI territories," said FCC Chairman William Kennard.

"As a result of today's ruling, we are one step closer to delivering on the promise of the Telecommunications Act of 1996 -- choice in the local telephone market and new, advanced telecommunications services for residential customers," said AT&T CEO C. Michael Armstrong. He praised the FCC for acting swiftly and for recognizing that the AT&T-TCI merger was in the public interest.

The combination won't be a slam dunk, said telecom analyst Scott Cleland, managing director of Legg Mason Precursor Group in Washington, D.C. If AT&T can successfully blend the companies, the merger will finally break the logjam to open local competition.

"AT&T is betting the farm on it. But for the next five to seven years, up to 80 percent of U.S. households will not see competition," he said.

Kennard said he was especially pleased by Armstrong's commitment to offer service uniformly in all neighborhoods in every city it serves.

"It is my hope that through this combination, the parties will work to tear down the boundaries that have needlessly separated telecommunications technologies and will focus just as intently on bringing all Americans the advanced telecommunications services that the world has to offer," he added

"The merger is the key to making AT&T the 'any distance' company we need to be and our customers want us to be," said Armstrong earlier after shareholders overwhelmingly voted to approve the merger. With the merger, AT&T will have a direct broadband connection to customers' homes, and, over time, will be able to give consumers a choice in local telephone service.

Consumers will probably see benefits from the AT&T-Time Warner cable alliance before the AT&T-TCI merger, Cleland said. "Time Warner has a decent plant, and AT&T is going to have to retrofit TCI's lines."