AT&T may get cable-ownership reprieve from FCC

Federal Communications Commission Chairman Michael Powell says his agency will re-evaluate its cable-ownership conditions tied to AT&T's merger with MediaOne.

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WASHINGTON--The top U.S. telecom regulator said his agency will re-evaluate its cable-ownership conditions tied to AT&T's merger with MediaOne Group.

In a speech Wednesday, Federal Communications Commission Chairman Michael Powell did not rule out relaxing or eliminating merger restrictions imposed on Ma Bell as part of its acquisition of cable operator MediaOne. Those conditions have been stumbling blocks for AT&T as it attempts to adhere to rules guiding ownership of cable networks.

Siding with AT&T, the U.S. Court of Appeals for the District of Columbia Circuit overturned a cap that had barred any cable company from controlling more than 30 percent of the U.S. market.

In a 3-0 vote, the court said the FCC rules violated the free-speech rights of cable companies. The court also said the agency lacked authority from Congress to implement the caps.

"We're still digesting that," Powell said after a decision last week by the U.S. Appeals Court.

AT&T is the only cable operator over the 30 percent national ownership cap. It promised the FCC when acquiring MediaOne that it would either sell MediaOne's 25.5 percent stake in Time Warner Entertainment (TWE), spin off Liberty Media or sell a significant number of cable systems.

AT&T Chief Executive C. Michael Armstrong has repeatedly said he'd be happy to get rid of TWE or Liberty Media, but so far both paths have involved significant financial cost, which is not much of an incentive for a company whose stock is trading at record lows.

AT&T has been awaiting a ruling by the Internal Revenue Service that would allow it to spin off Liberty Media without taking a large tax hit related to its quick release. AT&T acquired Liberty Media as part of its Tele-Communications Inc. purchase two years ago.

Powell said the FCC will soon announce whether it will attempt to rewrite the cable ownership statute and revisit the MediaOne conditions.

Democratic FCC Commissioners Susan Ness and Gloria Tristani have said that a possible relaxation on cable ownership shouldn't justify reducing or eliminating the MediaOne conditions.

However, along with hinting at the elimination of the MediaOne merger requirements, Powell showed again that he will be more flexible with merger reviews than were his predecessors.

Saying the FCC owed the industries it regulates quick action on mergers and other issues, he cited a saying he said was popular when he served in the Army: "Do something and do it fast or you'll get killed standing there."