GROUPS PRESS FTC ON AT&T's TWE STAKE

Television Digest with Consumer Electronics, July 3, 2000

Following setbacks at FCC, consumer groups asked FTC June 26 to force AT&T to divest its minority holding in Time Warner Entertainment (TWE). Action targeted both AT&T-MediaOne and AOL- Time Warner deals. In 5-page letter to FTC Chmn. Robert Pitofsky, Consumers Union (CU) charged that AT&T's 25.5% stake in TWE, inherited from MediaOne, violated govt.'s 1997 consent decree covering purchase of Turner Bcstg. by Time Warner. Under order, FTC required TCI to strictly limit its ownership and voting interests in Time Warner because of concerns about cable concentration. "We are claiming this [TWE stake] violates both the intent and language of the consent decree," said Gene Kimmelman, co-dir. of Consumers Union Washington office.

AT&T, which closed on its $44 billion purchase of MediaOne 3 weeks ago, quickly dismissed challenge. "Our merger is in compliance with the FTC decree and we see no reason to change it after the fact," spokesman said. FTC spokesman declined comment. Agency, which already has asserted itself aggressively in govt. review of AOL-Time Warner merger, didn't impose preconditions on AT&T-MediaOne deal, unlike FCC and Dept. of Justice.

In letter to FTC, CU argued that unless ownership links between 2 companies were cut, AT&T-MediaOne and AOL-Time Warner would have "incentive to disadvantage programmers who compete with TWE and Time Warner because AT&T will receive an economic benefit from carrying TWE's program networks and from not carrying competing programming." In addition, group contended, "AT&T might discourage TWE from distributing on comparable terms its valuable programming to AT&T's MVPD [multichannel video programming distributors] competitors, particularly cable overbuilders in AT&T's territories." CU said links violate FTC's Time Warner- Turner consent decree, crafted to eliminate anticompetitive incentives by forcing TCI to limit its stake in Time Warner. "There is a mutuality of interests in favoring each other's assets," Kimmelman said.

CU move came after FCC in approving AT&T-MediaOne merger with conditions, gave AT&T choice of selling its TWE stake, spinning off Liberty Media and other programming holdings or shedding cable systems with 9.7 million subscribers to meet govt.'s cable ownership limits. CU and other consumer groups fought unsuccessfully for order requiring AT&T to sell TWE, arguing that all ownership links between AT&T and Time Warner, nation's 2 largest MSOs, should be cut. But FCC opted to let AT&T choose one of 3 options and gave it nearly year to complete task, allowing MSO to consummate MediaOne deal. "My hope is this will be the fastest challenge," said Kimmelman, whose organization and allies still plan to contest FCC's approval in agency administrative proceedings and courts.

FTC filing also came 3 days after FCC expanded its probe of AOL-Time Warner merger. In 9-page letter sent to both companies June 23, FCC Cable Bureau Deputy Chief Royce Dickens sought details on: (1) New AOLTV interactive service. (2) New AOLTV set-top box. (3) AOL's carriage agreements with Time Warner and DirecTV. (4) AOL's plans to offer fast Internet access over cable, satellite, DSL and wireless platforms. (5) Possible integration of AOL's broadband service and Road Runner. (6) Any exclusive deals that AOL and Time Warner have with Internet content providers. (7) New services and companies that partners plan to produce. (8) Ownership stakes that they have in other companies. (9) AOL's plans for TiVo. (10) Companies' plans to open Time Warner's cable systems to competing ISPs and place AOL on other MSOs' systems. AOL and Time Warner must reply by July 17.