AT&T looks for cable deals

AT&T chairman and CEO Michael Armstrong said he hopes to sign deals with several cable operators that will allow his company to bypass the stranglehold of regional Bells and provide local phone service over cable lines, according to a report.

Some of the possible partners include Time Warner, Comcast, and Cablevision. AT&T has already moved to acquire cable operator Tele-Communications Incorporated but is in the process of addressing concerns that regulators have about the merger.

However, Armstrong said the TCI deal is on track and will not be derailed, the New York Post reported.

Most analysts agree that AT&T's moves to court other cable operators will not adversely effect its chances of having the TCI merger approved.

"It is in the interest of consumers that regulators allow long-distance carriers into the local phone markets," said Eric Melloul, an analyst at equity research firm Argus Research. "There's very little competition on the residential level for the local Bells."

He pointed out that although long-distance companies are, in fact, allowed to compete at a local level, they have only successfully penetrated the business market.

"This would be the first true alternative to the local monopoly at the residential level," Melloul added. "We are talking eventually about nation-wide competition in the local markets."

Other analysts say that regulators will not feel threatened by AT&T's talk of further partnerships, since the company is unlikely to enter into deals with many cable operators for fear of competition from other long-distance carriers.

"AT&T hasn't discovered America here," said Philip Wohl, an analyst at S&P Equity Group. "Other companies are on to it too."

Wohl said that it is too early to tell whether entering the local market through cable companies is even the right move for AT&T or any other participant.

An AT&T spokesman who addresses regulatory policy issues said that the company is willing to speak openly about its desire to enter into agreements with cable companies--without fear of regulatory reprisals--since the telco is in fact pushing for goals set out in the Telecommunications Act of 1996.

"One of the primary goals of the act was to open up local markets to competition," said AT&T spokesman Wayne Jackson. "Our primary reason to enter into this merger with TCI is to use their facilities to bring competition to local phone companies."

Armstrong is hoping to further increase the reach of AT&T beyond TCI's customer base by cutting deals with other cable operators around the nation. He said AT&T is open to alliances, equity deals, and joint ventures, the Post reported. In addition, as with the TCI deal, AT&T is prepared to consider acquisitions.

Although regulators would strongly scrutinize any further acquisitions of cable operators by AT&T, Armstrong said he thought there was still space to make additional acquisitions, the Post reported.

Armstrong added that he would prefer alliances and partnerships because they are less expensive, the Post reported.