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FCC questions AT&T, TCI unbundling

Several commissioners indicate that they are reluctant to force AT&T and TCI to unbundle their cable Net access system as a condition of their merger.

WASHINGTON--Several FCC commissioners gave strong signs today that they are reluctant to force AT&T and Tele-Communications Incorporated to unbundle their cable Internet access system as a condition of their $48 billion merger.

In an FCC hearing, two commissioners indicated that they would probably prefer to see the bundling issue addressed in another context, where a ruling could be applied across the industry.

"Mergers are very case-fact specific," commissioner Michael Powell said. "Not always the best place for broad public policy making."

Commissioner Susan Ness also said that the merger proceedings might not be the best place to address the bundling issue. She told the audience that the MCI WorldCom merger approval could be instructive, as "there were an awful lot of issues that we declined to address in that merger analysis."

Much of the AT&T-TCI hearing was dedicated to debate over whether the two companies should allow other Internet service providers, such as America Online or MindSpring Enterprises, direct access to their cable Internet services without going through the @Home cable network.

AT&T senior vice president James Cicconi repeated other officials' warnings that any such conditions could unravel the multimillion-dollar deal altogether. Forcing only AT&T and TCI to unbundle their cable net service would be unfair, he added.

"If you applied it in this context, you would wind up with a company hobbled by conditions that did not apply industry-wide," he said.

Representatives from MindSpring, US West, and the National Consumers Union argued that the merged company should open its network to other ISPs.

"We don't want this for free," MindSpring CEO Charles Brewer said, adding that the company is willing to pay a higher premium for the cable access to defray TCI's investment in the network. "They took a risk and they deserve a reward, but that reward can not take the form of monopoly or duopoly over a core telecommunications function," he added.

But Powell and Ness, at least, seemed sympathetic to Cicconi's concerns.

If the FCC does have the power to require @Home to unbundle its services--a matter over which there is still some legal question--the issue could either be decided in a ruling that would affect the entire industry, or in the current merger proceedings, Powell indicated.

"If we did that [now], we should be able to defend why we chose to impose [the regulations] on a single entity," Powell said.

The FCC is still in the early stages of debating whether to approve the AT&T-TCI merger. Most signs have indicated that the commission is loath to block the deal, since one outcome would be to add to local phone competition. A final decision on the merger is not expected for several months.