Deal faces a thicket of legal hurdles Federal officials plan antitrust reviews

October 14, 1993|By Lyle Denniston | Lyle Denniston,Washington Bureau

WASHINGTON -- The proposed merger of Bell Atlantic Corp. and the nation's largest cable-television company faces government inquiries that could keep the deal under a legal cloud for years -- with no guarantee of official approval.

Within hours of yesterday's announcement of the huge corporate union -- valued at $30 billion or more -- federal officials were questioning the impact on consumers and competitors. One key legislator criticized the deal as a "double whammy" for consumers.

"This will test the mettle of the Clinton administration in a very early and dramatic way," said Andrew Schwartzman, a communications industry legal analyst and head of the Media Access Project. Such a huge merger "is not what people had in mind when they talked about telephone companies competing with cable. This is making love, not war."

These official reviews of the Bell Atlantic/Tele-Communications Inc. deal were promised or are expected:

* An antitrust review, either by the Justice Department or the Federal Trade Commission, to determine the legality of the merger under a federal law governing mergers.

* Congressional hearings before an anti-merger member of the Senate, Howard M. Metzenbaum, an Ohio Democrat who heads a Judiciary subcommittee on antitrust.

* A review by U.S. District Judge Harold H. Greene, who presided over the 1984 breakup of AT&T after the government sued the company for antitrust violations. Since the breakup, Judge Greene has retained review powers over Bell Atlantic and the six other "Baby Bells" that emerged and has been skeptical of moves that could hurt competition.

* A review by the Federal Communications Commission of rules on cross-ownership of phone companies and cable-TV companies, and rules governing phone companies' right to send textual video messages.

Washington appeared to be as surprised by the merger plans as were the communications industry and Wall Street. The sheer size of the deal was a key factor in the quick announcement of official reviews.

On Capitol Hill, Mr. Metzenbaum, a critic of giant mergers, said his antitrust subcommittee will hold hearings. The merger, he said, "is a double-whammy for consumers -- they could face overcharges for both cable TV and local phone service. Instead of lower prices from fierce head-to-head competition between the phone and cable companies, consumers face a megamonster."

The FCC chairman, James H. Quello, said the planned merger "represents the most momentous deal of the decade in this decade of huge mergers, acquisitions and joint ventures."

He spoke both positively and cautiously about the deal. "It has the constructive potential to expedite the initiation of competitive super-electronic highways with multichannel, multifaceted service to the public." But, he added, the FCC will examine compliance with its rules.

He noted that a federal judge in Alexandria, Va., in August struck down a key part of the law that barred phone companies from entering the cable-television business in their own service areas. The cable industry is appealing that ruling to higher courts.

Bell Atlantic and TCI have crafted a backup plan in case the merger runs into a regulatory or judicial roadblock. Should that happen, TCI properties that are most likely to face resistance will be spun off into a new publicly traded company.

That new company, which would receive $1 billion from Bell Atlantic, would operate TCI's cable stations in the Bell Atlantic service area and programming properties of TCI's Liberty Media affiliate. Bell Atlantic and the new company would form a venture to move ahead with programming and interactive multimedia services, like video on demand.

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