AT&T has been working to overturn an ownership cap on cable systems that limits a company's access to no more than 30 percent of homes receiving cable or direct broadcast satellite. The cap is designed to foster competition within the cable industry, in particular to prevent a situation where a cable programmer might be unable to make a profit if one large cable operator declined to carry its channel.
With AT&T's purchase of TCI and MediaOne, Ma Bell is over the cap, and it agreed as part of the Federal Communications Commission's approval of the MediaOne purchase to divest itself of cable assets until it was under the cap. The company has said it purchased TCI and MediaOne primarily to use the cable networks for phone service.
AT&T's lobbying efforts come at a sensitive time, for two reasons. First, Congress is scheduled to adjourn for the year the first week of October and won't reconvene until mid-January after the elections and with new members. All bills introduced but not passed in this Congress will be lost.
Second, federal regulators are reviewing the proposed pairing of yet another media giant, America Online and Time Warner. Part of the cable ownership counted toward the cap for AT&T is its 25 percent ownership of some of Time Warner's cable systems.
"We absolutely, fully intend to comply with the merger conditions," AT&T spokesman Jim McGann said.
He added that "we're talking to people on the Hill about our concerns." AT&T is one of several companies, including Time Warner, fighting the ownership cap in court and has frequently sent its army of lobbyists to the Hill to discuss the issue. AT&T chief executive Michael Armstrong is scheduled to meet with Hill leaders today about the matter.
Ma Bell's long-standing lobbying against the cable-ownership cap appears to be making headway, as sources say Senate Appropriations Committee chairman Ted Stevens, R-Alaska, is drafting language that would lift or eliminate the cap. The bill would be applicable to any cable operator, although AT&T is the only provider currently facing cap problems.
AT&T has continued to lobby the FCC as well, and in a filing with the commission last Friday said cable-ownership rules, despite a tweaking earlier by the commission, remain "arbitrary and overly restrictive." The cable giant pointed out that broadcasters have a higher cap at 35 percent, and suggested that 40 percent would be more reasonable.
AT&T faulted the FCC's counting of minority interests in a cable system--an ownership stake as low as 5 percent can result in inclusion of those subscribers under the cap. If only AT&T's owned-and-operated systems were counted, the company would be far below 30 percent of U.S. subscribers, McGann said.
Given AT&T's position relative to the cap, each new subscriber the company picks up in an existing system puts additional pressure on the company to comply with legal limits. One argument the company has made is that if new subscriber growth forces AT&T to divest systems, its natural inclination will be to keep high-volume, high-profit regions and sell off less profitable rural or inner-city systems, thus possibly exacerbating the so-called digital divide.
Stevens' office wouldn't confirm the drafting of the amendment, but if it is introduced Stevens would seek to attach it to the spending bill for the Commerce Department and the FCC.
That bill already has an amendment attached to it seeking to ban the FCC from approving mergers involving a foreign government-owned telecommunications carrier, and some are seeking to have language limiting the FCC's ability to review mergers attached to it.
There was talk today that Senator Ernest Hollings, D-S.C., author of the restriction on foreign governments, might support the cable-ownership language as part of a quid pro quo. Hollings' office had no comment, but a source close to the situation said that Hollings had not yet taken a position on easing cable-ownership restrictions, and added it was "just not true" that any kind of deal was being worked out with Stevens.
Congress must pass a spending bill this year, but it doesn't have to vote on the Commerce bill separately, and Senate Majority Leader Trent Lott, R-Miss., has declined to schedule a vote on that bill. President Clinton has already threatened to veto the bill over spending cuts in the House version.
One Congressional source speculated that there was a "30 to 60 percent chance" the spending bill would suffer the same fate as similar bills in previous Congresses--namely, being rolled into an omnibus, or all-purpose, spending bill designed to reduce the likelihood of a presidential veto. If that happens, there's no guarantee any of the add-on items such as cable ownership, foreign government-owned telecom restrictions, or FCC merger reform, would survive.