Blockbuster cable deal draws fire

  • Thursday, December 20, 2001 9:00pm
  • Business

Associated Press

NEW YORK — AT&T and Comcast Corp. executives touted their blockbuster cable merger Thursday as a way to provide television, Internet and telephone service to a fifth of America’s households at competitive prices.

But the $45 billion stock deal to merge the No. 1 and No. 3 cable providers was condemned by consumer advocates who doubt prices will go down and fear that much control in the hands of a single company.

The opposing views are sure to dominate debate over whether regulators in Washington, D.C., should approve the deal to create a company with 22.3 million subscribers — almost double the size of the closest rival, AOL Time Warner.

Most Snohomish County cable subscribers are served by AT&T.

The new company, to be called AT&T Comcast Corp., will provide competition in local telephone markets and give consumers "greater choices at very competitive prices," AT&T chairman and chief executive C. Michael Armstrong said in an interview. "This just couldn’t be better for the consumer."

Jeff Chester, executive director of the Center for Digital Democracy, said the merger will give one company leverage over too many consumers’ communications needs.

"Americans should be very worried about how this new combination will affect what they pay each month for cable and Internet service," Chester said.

Cable company executives don’t have a good track record at predicting the direction services will take, he noted. More than five years ago, before AT&T went on a buying binge of cable companies, they forecast that phone service would be widely available through the same fiber-optic cable, and it hasn’t come true yet.

Analysts said the future will bring progress, but perhaps more gradually than the indusry’s cheerleaders see it.

"I remember when we were going to get all of our services through our phone jack as late as 1993, but that died a pretty quick death," said Laura Behrens, a media analyst with the Gartner G2 unit of research group Gartner Inc.

On average, basic cable television service costs about $38 and a high-speed internet connection $40 to $50 — not including any installation or startup fees or the costs of equipment like modems.

If regulators approve the AT&T-Comcast deal, the merger is expected to be completed at the end of next year. Armstrong will become chairman of AT&T Comcast and Comcast president Brian Roberts will get the chief executive post.

In the interview, they said they would share responsibility for running the company, but that Roberts would have control over day-to-day management.

Under terms of the deal, AT&T Comcast will assume $25 billion in debt, including $5 billion of AT&T Broadband debt held by Microsoft that will be converted into shares of the new company.

In a news conference, Roberts sidestepped questions over how many jobs may be cut as the two companies combine operations, but he acknowledged that some of cost saving measures will come from eliminating overlapping positions.

AT&T’s Denver-based cable unit has 40,000 employees, and Philadelphia-based Comcast has 35,000.

Both Roberts and Armstrong said they have decided that AT&T Comcast’s headquarters will be in Philadelphia, with an executive office in New York, where AT&T is based.

The merger is the largest for 2001, and came five months after AT&T rejected a bid by Comcast to buy the cable business for $41 billion. After a bidding process, AT&T’s board chose Comcast’s revised bid and rejected proposals by AOL Time Warner and Cox Communications.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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