AT&T balks at access for ISPs

AT&T was responding to last month's barrage of critical comments from competing phone companies, as well as ISPs like America Online and Mindspring, that want to reach subscribers though TCI's high-bandwidth cable network.

The merger's critics want AT&T to give competitors access to the cable pipes as a condition of the merger, much as regulators now require local phone companies to give competitors access to their networks.

But in its statements to the FCC late Friday, AT&T said that kind of new regulation could undermine the deal altogether, by reducing profits for TCI's @Home cable service.

"There is no basis in law or fact for the proposed conditions, and the imposition of them--either here or in a future industry-wide proceeding--would severely jeopardize the proposed merger and the immense benefits it would offer consumers," the company wrote.

AT&T has described its $48 billion merger with TCI as primarily a way to enter local phone markets without having to work though the networks of the Baby Bell and other dominant local phone companies.

But the deal also gives the long distance giant a leg up in a quickly growing area of high-speed Internet access. TCI is the majority investor in the @Home service, which provides a high-speed Net connection as well as online content similar to that on America Online.

AT&T officials have made only the barest of conciliatory gestures to rivals, saying that customers using TCI's cable services could also subscribe to services like America Online along with their @Home service. Companies that have not paid for the cable network should not be able to take advantage of the investments, officials say.

"No company will invest billions of dollars to become a facilities-based broadband services provider if competitors who have not invested a penny of capital nor taken an ounce of risk can come along and get a free ride on the investments and risks of others," said AT&T chairman C. Michael Armstrong in a speech to a cable industry group earlier this month.

"If those companies want to move up into broadband, terrific. But getting a free ride on someone else's investment and risk is not the way to do it," Armstrong added.

Ammunition for the enemy
AT&T's position has given new ammunition to local phone companies, who have long argued that they should not be required to give their new competitors access to a full range of services.

In comments filed with the FCC Friday, BellSouth officials said they should not be forced to offer their own high-speed ADSL Internet connections though separate business entities, as regulations now require.

"AT&T makes the same case against unbundling TCI's cable service that BellSouth makes against unbundling its advanced data services," said Rob Capell, BellSouth's senior vice president, advanced data networks. "In fact, we couldn't agree with AT&T more."

The Baby Bell companies have consistently told policymakers that regulatory hurdles are slowing their rollout of high-speed data services. BellSouth officials said Friday that the FCC should block the AT&T hearing unless regulators treat local phone companies the same way.

"A playing field slanted against local phone companies such as BellSouth may very well cement AT&T-TCI's dominant position," said BellSouth vice present Randy New. "This merger can only be in the public interest if Bell companies are permitted to compete for Internet customers with the same regulatory freedoms AT&T is demanding."