Consumers fight AT&T-Comcast merger

Saying the merger will lead to poor service and create a monopoly situation, consumer groups are asking officials in towns that are holding public hearings on the matter--Cambridge, Mass.; San Francisco; Dallas; and Montgomery County, Md.--to refuse to transfer the cable franchises, or service contracts, affected by the AT&T-Comcast merger.

The Consumer Federation of America (CFA), an association of 280 state and local affiliates, is working on the campaign, the group said Tuesday.

In April, U.S. senators also questioned the impact that the deal could have on programming and Internet access. They said the size of the company--which would have 22 million subscribers--could lead to a bias against unaffiliated programming and could limit consumer choice for Internet service. However, they said the merger did not present antitrust concerns.

"This merger places consumers at severe risk by creating pressures to cut costs and reduce capital spending, which will undermine service quality," said Mark Cooper, director of research for the CFA.

The $72 billion AT&T merger was made official in December.

"With every merger we lose more of the local touch that people crave in their transactions," said Paul Schlaver, chairman of the Massachusetts Consumer Coalition, which is also working on the campaign. "There's a general malaise in people's minds because state authorities and the Feds don't want to play an active role, so the burden falls on us," he added.

Cable companies seeking a local "franchise," or the right to offer cable service in a town, need permission from local authorities. These authorities are likely to refuse franchises, or agree to them only under the condition that they agree to provisions such as "open access" and certain pricing structures, many people involved have said.

When AT&T started buying cable companies in 1998, the big local phone companies mounted an expensive campaign for open access. Pushed by the phone companies, open access requires cable companies to share their wires with rivals, just as phone companies have been required to do.

AT&T spokeswoman Claudia Jones said open access won't be an issue since AT&T has "said all along that we're open to more than one ISP on our broadband lines." AT&T has deals with EarthLink; Net1Plus, a regional ISP in Massachusetts; and Internet Central, a regional ISP in Seattle.

In addition to open-access issues, the CFA is recommending that local authorities examine pricing, the possible loss of senior discounts, quality-of-service issues and financial-responsibility standards.

"I've been involved with cable issues for a long time," Schlaver said. "One of my gripes has been that there are just endless price increases, and services keep going down," he added.

The open-access issue was at the heart of what AT&T faced in 1999 in Portland, Ore., after its merger with TCI. City officials would not allow the transfer of local cable franchise licenses from Tele-Communications Inc. (TCI) to AT&T, saying the company had to offer a choice of ISPs. At the time, AT&T didn't have the technology to do that, so it didn't launch high-speed Internet services in Portland. That legal case is still before the 9th Circuit Court of Appeals.

The battle over open access has diminished somewhat over the years as the big cable companies have agreed to let outside ISPs such as EarthLink offer cable modem services over their wires. The open-access issue has yet to be resolved by the Federal Communications Commission, and it isn't likely to be mandated within the next three years, Boston-based researchers The Yankee Group wrote in a recent report.