Cable-telco acquisition met with mixed D.C. reaction

Tauzin: Buyout sends up a red flag

Reaction from Washington late Tuesday to the proposed AT&T buyout of TCI was divided: Some sources said the Federal Communications Commission may look kindly on the deal because it is desperate to fuel competition to the Baby Bells; others said legislators may be alarmed by the immensity of the consolidation.

The combination of AT&T’s telco prowess with TCI’s cable infrastructure is likely to be seen as the first real threat to the local telephone monopoly.

Although TCI’s wired network still needs a lot of work, it could become an ideal launchpad for AT&T to invade several local telephone markets where TCI has extensive wiring.

The Telecommunications Act of 1996 was built on the premise that the Baby Bells would open themselves up to competi-tion from the cable industry in return for access to the long distance marketplace.

But almost as soon as the legislation was signed into law, members of Congress and regulators were informed that cablers were no longer enthusiastic about telephony. At the same time, the telcos began filing lawsuits aimed at blocking the FCC’s efforts to pry open the $100 billion local telephone market.

So, if regulators and Justice Dept. antitrust officials perceive that the deal reverses the current stalemate in local telephony, it would be tagged as “pro-competitive” thereby greatly improving its chances and timetable for approval.

In contrast, the reaction to the deal from the office of one influential Washington legislator was outright alarm.

Ken Johnson, a spokesman for House telecommunications subcommittee chairman Rep. Billy Tauzin (R – La.), said: “This clearly sends up a red flag, when the world’s largest telecommunications company merges with the world’s largest cable company.

“We’d counted on telecommunications companies like AT&T to be the competitors to cable. The operative word here is ‘competitors.’ Now, when they throw up their hands in surrender, with a ‘If we can’t beat ’em, we’ll join ’em’ mentality, that’s very disturbing.”