Consumer advocate Ralph Nader is expected to ask Federal Communications Commission chairman William Kennard to hold public hearings on the potentially harmful effects of AT&T's proposed $68 billion buyout of Tele-Communications Incorporated.
In a letter that was to be sent to Kennard tomorrow, Nader wrote: "Given AT&T's history in anticompetitive actions, and TCI's enormous reputation for anticompetitive actions in the cable television market, it is prudent to expect bundling strategies to be used in anticompetitive ways against rivals."
He added: "We ask the the commission schedule public hearings to discuss and debate these and other aspects of the proposed merger."
AT&T and TCI announced their proposed merger Wednesday. Under the deal--which is still subject to approval by the FCC and either the Justice Department or the Federal Trade Commission--AT&T would combine its long distance, wireless, and Internet services with TCI's cable, telecommunications, and high-speed Internet business to create AT&T Consumer Services, a new subsidiary that would essentially serve as a one-stop shop for communications.
In his letter, Nader, who is affiliated with the Consumer Project on Technology, is to tell Kennard that his organization is "surprised to read that you have already issued several positive comments on the proposed merger." He added that the deal could lead to a system in which the companies bundle a myriad of products and services that "has the effect of binding the consumer to the monopolist for several goods."
Interestingly, Nader contended, TCI chairman John Malone has "indicated the plan was for AT&T to be involved in a much broader array of consumer purchases, including, Mr. Malone said, such products as [potency drug] Viagra, through a planned 'front end' interface to the Internet and electronic commerce."
Allowing the merged company to bundle an increasing number of services and products "permits the firm to extend its monopoly in one market to others," Nader wrote.
Representatives from the FCC, AT&T, and TCI were not immediately available for comment today on Nader's letter. One day after the deal was announced, however, Kennard told a group of communications lawyers the merger was "eminently thinkable, but only if there are tangible consumer benefits." He added that he hoped the merged company would bring high-speed Internet access to U.S. consumers and said his commission would be reviewing the deal.
In announcing the deal Wednesday, Malone said it was "exactly what the federal government had in mind when it passed" the Telecommunications Act of 1996. The legislation was designed to create competition in the cable television, long distance service, and local phone markets by making it easier for companies to enter into their competitors' turf.
Nader also noted that the AT&T-TCI deal is just one of many troubling unions that has been forged among communications and media companies over the last year or so. "As the number of firms dwindles and firms become entangled in alliances, joint ventures or mergers, debate narrows," Nader wrote. "At a certain point of inbreeding, the genetic stock begins to suffer, along with the vigor of competition in innovation."
Other examples of such alliances include a Bell Atlantic executive sitting on the board of Compaq Computer, an ISDN videoconferencing deal that makes Intel beholden to Pacific Bell, joint ventures between TCI and Time Warner.