Baltimore might get new cable provider

Comcast replaces TCI if AT&T swap clears

May 06, 1999|By Mark Ribbing | Mark Ribbing,SUN STAFF

The swap of cable-television markets between Comcast Corp. and AT&T Corp. stands to revamp the way Baltimore consumers get television, telephone and Internet service.

If the deal goes through as planned, it could end TCI Communications' tenure as the city's cable provider. The transaction faces a difficult regulatory review, however.

Comcast Corp., the Baltimore area's largest cable company with 300,000 customers in Howard, Harford and Baltimore counties, apparently would take over cable service in the city.

The agreement could also pave the way for AT&T to compete with Bell Atlantic Corp. in the region's local telephone market. AT&T, the largest long-distance telephone company, is moving aggressively across the country to offer local phone service using cable-TV lines.

AT&T Chairman and Chief Executive Officer C. Michael Armstrong said the Comcast transaction would enable his company to "extend our telephony services in the competition for local [telephone service] in the Comcast territory."

With that in mind, AT&T bought Tele-Communications Inc. of Englewood, Colo., the parent company of TCI Communications of Baltimore, in a deal that closed in March.

Bidding contest

The agreement between AT&T and Comcast, which was announced late Tuesday, followed a brief bidding competition between the two companies for MediaOne Group Inc., a cable company also based in Englewood.

Comcast agreed on March 22 to buy MediaOne for $53 billion. AT&T, trying to get its hands on as many cable networks as possible, quickly bid $58 billion.

AT&T appears to have triumphed in the battle for MediaOne. Philadelphia-based Comcast issued a terse statement Tuesday evening saying it "has decided not to submit a revised offer to purchase MediaOne Group Inc." The company added that it expects to receive a $1.5 billion termination fee provided for in its merger agreement with MediaOne.

`Win-win result'

Comcast and AT&T have reached a sweeping conciliation, however, involving cable properties from New Jersey to California. Comcast President Brian L. Roberts said in a statement, "This is a different outcome than our MediaOne proposal, but it is an elegant win-win result."

Wall Street seemed to agree. AT&T shares were up $5.375 in yesterday's trading, closing at $56.9375. Comcast rose $9.1875 to end the day at $73.3125. MediaOne lost 75 cents to close at $76.875.

Most of the proposed swaps are contingent on the completion of AT&T's acquisition of MediaOne, which, like the Comcast deal, depends on permission from local cable franchises and from federal regulators, including the Federal Communications Commission.

AT&T's MediaOne and Comcast cable deals are likely to be subjected to strenuous review. The MediaOne acquisition would make AT&T the largest U.S. cable company, with access to more than 25 million U.S. homes. If AT&T negotiates joint ventures with other cable providers, it could reach more than half of the nation's cable-TV households.

"I think there are major regulatory issues that are going to be raised, centering on [AT&T's] dominance in the video business and their dominance in the cable-modem business," said Brian Adamik, an analyst with Yankee Group in Boston. "Our sense is some concessions will need to be made."

Senate hearing planned

Sen. Mike DeWine, an Ohio Republican who is chairman of the antitrust subcommittee, plans a hearing early next month to consider the competitive impact of the AT&T-MediaOne union.

The complex deal between AT&T and Comcast is based on the principle that it is more efficient to market communications services to a large, geographically connected region than to numerous scattered markets. To that end, the companies are seeking to trade markets so that each will have a cohesive service area.

For example, when Comcast has promoted its services in the Baltimore area, much of the audience for such advertising has been made up of Baltimore residents who aren't served by Comcast.

The deal might also mean faster Internet access for city residents. Comcast has begun offering high-speed Internet service with cable modems, a service that TCI does not provide in Baltimore.

Daniel Zito, an analyst with Legg Mason Wood Walker Inc. in Baltimore, said AT&T is entering the Baltimore market in large part to expand its local telephone service.

"The primary reason they're doing it is to provide local [telephone] service over the cable plant in competition with Bell Atlantic," Zito said.

AT&T is also asserting itself as a provider of cable television and especially of high-speed Internet service, Zito said.

"AT&T here has clearly staked out its position as the No. 1 cable provider," Zito said. "What I think [the Comcast deal] is doing is setting up AT&T as one of the primary beneficiaries of the shift in telecommunications services to the Internet and other data services."

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