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MediaOne fits cap, AT&T says

Conglom will cover 27% of U.S. cable subs

WASHINGTON — AT&T has told the FCC that the agency’s new rules allow the conglom to complete its merger with MediaOne without spinning off its stake in Time Warner or Liberty Media.

AT&T argues that its acquisition of MediaOne will leave it with a hold on 27% of the nation’s cable subscribers — clearly below the FCC’s 30% ownership cap. It also insists that the new rules allow it to hold a 25.5% stake in Time Warner Entertainment without counting any of TWE’s subscribers toward AT&T’s cap.

According to AT&T, the merger will give it 21.9 million subs — 27% of the 81.4 million U.S. homes that subscribe to some form of TV service, including cable and satellite.

AT&T maintains that the FCC’s rules allow it to own a huge stake in the second-largest cable company in the country because it is “not materially involved in the video-programming activities” of TWE.

Public interest advocates and some officials at the FCC have argued that Time Warner’s 13 million subscribers should be counted toward AT&T’s cap. Doing so would put AT&T over the 30% national cap and force it to sell off MediaOne’s stake in Time Warner in order to complete the deal.

AT&T also insists that its ownership of Liberty Media does not present a problem under the FCC’s new ownership rules.

FCC staffers, however, have expressed some concern about the telco-cable giant controlling one of the most powerful cable programming companies along with the largest single holding of cable subs.

FCC staffers will be taking a particularly close look at the possibility that AT&T’s ownership of Liberty could influence program-buying decisions at Time Warner. Well aware of the FCC’s concern, AT&T lawyers insisted that “Liberty is structurally separate from AT&T.”

AT&T insists that it has no control over management decisions or programming sales at Liberty. “AT&T literally has nothing to do with and derives no economic benefit from any such sale,” wrote AT&T.

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