Justice approves AT&T-TCI merger But TCI ordered to sell interest in Sprint PCS

Telecommunications

December 31, 1998|By NEW YORK TIMES NEWS SERVICE

WASHINGTON -- The federal government took a big step toward redefining the Internet yesterday when the Justice Department approved the proposed $31.8 billion acquisition of the cable giant Tele-Communications Inc. by AT&T.

The deal, announced in June, cannot be closed without the consent of the Federal Communications Commission, whose officials said yesterday that the agency's staff was more than a month away from finishing its review under different standards and laws from those considered by the Justice Department.

After the staff review and recommendations, the five commissioners would have to decide whether the deal is in the public interest or, as critics have argued, it would give AT&T the power to sharply limit access to the Internet of other telephone companies and access providers.

Nonetheless, yesterday's decision by antitrust regulators removed a significant potential obstacle and moved the two companies closer to becoming a vast new telecommunications conglomerate. That conglomerate would offer a big new artery of higher-speed access to the Internet that the companies' executives say would enable computer users to transfer data more easily, hold clearer conversations and eventually receive TV-quality video.

Because both AT&T and TCI hold substantial interests in wireless telephone services, Justice Department officials approved the deal only on the condition that TCI divest its interests in that business. The company will have five years to sell its 23.5 percent interest in Sprint PCS, one of the nation's leading providers of digital wireless telephone service.

Antitrust officials had raised concerns that the proposed merger could affect the price of wireless service because AT&T, with about 9 million customers, is the nation's largest provider.

"In the past few years, increased competition in mobile wireless services has produced lower prices, higher quality and millions of new subscribers," said Joel Klein, the assistant attorney general in charge of the Justice Department's antitrust division.

"The settlement reached today will insure that the merger will not blunt the move toward a more competitive market in wireless services and that customers continue to reap the benefits of that competition."

Under the agreement with the Justice Department, if the deal closes before TCI divests its interest in Sprint, the Sprint stock must be placed in a trust until it is sold.

Executives at AT&T and TCI have said the merger will enable consumers to get one-stop shopping for their local and long-distance telephone service, cable TV, and access to the Internet and data services.

TCI and its affiliated systems -- including Baltimore's cable TV system -- reach more than 14 million customers representing about one-third of the nation's homes.

Since the breakup of the Bell telephone network in 1984, AT&T has not had direct access to most homes. But the proposed deal with TCI, made possible by the sweeping deregulation of the telecommunications industry two years ago, would change that.

James Cicconi, AT&T's general counsel, said the decision was good news for consumers.

"We are now one step closer to finalizing a transaction that will ultimately give residential customers broader choices for local telephone service and other advanced services and products," Cicconi said.

"We think it is especially significant that the only subject of today's consent decree is the ownership interest TCI currently holds in the cellular business of Sprint," he said.

But other telephone companies have maintained that the deal is fundamentally anti-competitive. They have expressed fears that it will prevent them from using TCI's lines to offer access to the Internet. That issue is now one of the central ones before the FCC.

Pub Date: 12/31/98

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