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Seattle approves AT&T-TCI merger deal

Seattle approves the merger of AT&T and TCI, effectively putting the brakes on the fight for cable open access--at least for now.

City and county officials in the Seattle area today approved the merger of AT&T and Tele-Communications Incorporated, effectively putting the brakes on the fight for cable open access--at least for now.

Seattle-area lawmakers, after several days of negotiations, reached agreements with the companies to ensure cable modem users will have a choice for their Internet service provider.

The timing of the votes is significant, given that shareholders from TCI and AT&T plan to vote on the proposed $48 billion merger tomorrow. Today was the final day for most local governments to approve or deny the transfers.

The city of Seattle, on a 6-0 vote, and the Metropolitan King County Council, by an 11-1 margin, approved the transfer of local cable franchise licenses to AT&T from TCI.

As part of the deal in Seattle, customers of the TCI-controlled @Home Network cable modem service will continue to be allowed to use the ISP of their choice, in addition to @Home and its content. Many ISPs have pushed for the right to pay TCI to use its network to deliver service in lieu of @Home.

Some local politicians characterized Seattle's requirement as a win for competition, if not truly open access.

"We don't have the authority to control price, but we can help level the playing field and encourage competition in other ways, " said Seattle city councilwoman Tina Podlodowski.

But under @Home's existing contracts with ISPs, consumers already are allowed to access other services such as America Online or MindSpring Enterprises--as long as they first pay for @Home. The Seattle ordinance simply puts into statute a requirement that AT&T allow consumers access to other ISPs in addition to @Home's content, according to city staff members.

Under the agreement with Seattle, AT&T has agreed to drop its two-year-old appeal of a lawsuit with the city. TCI had taken issue with Seattle's pole attachment rates--the fee the cable operator and other utilities pay the city to hang cables from telephone poles. Seattle expects to collect about $1 million in back fees and interest under the deal.

The city also has negotiated a series of refunds under a proposed cable "bill of rights" for consumers that receive poor customer service.

AT&T also agreed to provide telephone service to Seattle residents by the end of 2000.

The 13-member Metropolitan King County Council also approved the merger this afternoon, contingent upon a study that will explore cable open access issues.

AT&T approved of the municipalities' decisions.

"We are pleased that the Seattle City Council and the Metropolitan King County Council have chosen to do what's best for consumers. Seattle and King County residents will now have real options and choices when it comes to local telephone, video and Internet service," AT&T senior vice president Scott Morris said in a statement.

"We support the County Council plan to conduct a detailed study of the local marketplace within the next several months to ensure that consumers have true choice," Morris added.

Similarly, the city of Los Angeles has approved a plan that calls for a study examining the open access issue, but will not force TCI to open its network to other ISPs. City staff members must report to the Los Angeles City Council with their findings and recommendations in three months.

Some cities, such as Los Angeles, have expressed an interest in revisiting the open access issue the next time their franchise agreements expire. Los Angeles' franchise agreements with its various cable TV providers are set to expire in 2002.

Although many major cities considered forcing TCI to open its networks to competing Internet service providers, so far only Portland, Oregon, has denied the transfer of licenses. That controversial decision was followed promptly by an AT&T lawsuit.

In California, the city of Oakland, which earlier recommended denying the transfers, approved the deal on an 8-0 vote.

Oakland's resolution, however, leaves room for open access requirements if Portland wins its lawsuit with AT&T.

"Depending on what the courts determine in the Portland case, then AT&T and TCI agreed that Oakland would then have the same opportunity," said Oakland City Clerk Ceda Floyd.