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This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

June 5, 2000


STATEMENT OF FCC CHAIRMAN WILLIAM E. KENNARD REGARDING CONDITIONED APPROVAL OF AT&T-MEDIAONE MERGER


Today, I am announcing that the Federal Communications Commission has granted conditioned approval of the merger between AT&T and MediaOne. I rely on the specific commitments and concessions made by AT&T, detailed conditions that will require AT&T to divest significant portions of its cable holdings, as well as the strict compliance deadlines and enforcement mechanisms we adopt today. This decision strikes the appropriate balance between promoting competition in local telephone service and protecting competition in cable and high-speed Internet service.

We are in the midst of an era of unprecedented change, new competition and increasing consolidation within the telecommunications industry, largely the result of the 1996 Telecommunications Act. The American people and the economy are greatly benefiting from more competition in local telephone service, from spectrum auctions that have led to a revolution in the wireless industry, from more choices for long distance telephone service at lower costs, and from an Internet free of regulation, that grows exponentially on a daily basis and continues to change our lives. However, we must temper our excitement about all of this growth with some caution. The FCC must continue to carefully scrutinize mergers.

In many ways, todayís action represents the very goals of the 1996 Telecommunications Act Ė allowing new entrants into emerging markets without allowing big companies to have a stranglehold on their core markets. We struck an important balance between promoting competition in local telephone service and protecting competition in cable and high-speed Internet service.

AT&Tís application, as originally filed, was inconsistent with the public interest and presented significant diversity and competition concerns. As proposed, AT&T-MediaOne would have served 34.4 million consumers, or nearly 42 percent of all video programming subscribers. However, the merger we approved today looks very different from the application initially presented to us by the parties.

We are imposing specific, non-severable conditions on the merger that will prevent the company from serving as a bottleneck in the video programming market. This condition addresses one of my most serious concerns about the original merger application Ė AT&Tís proposal to serve almost 42 percent of the video programming market and maintain influence over the most popular programming content on cable.

First of all, AT&T is going to have to make significant divestitures in relation to its various cable businesses. The FCC allows cable companies to serve no more than 30% of the cable and satellite service market. AT&T must comply with our 30% limit by May 19, 2001, which is 12 months from the D.C. Circuit Court decision upholding the constitutionality of the statute underlying our 30% rules.

Within six months after closing its merger with MediaOne, AT&T must make an irrevocable election among three divestiture options in order to reduce their national subscribership to 30%. AT&T-MediaOne may choose to:

  • divest their interests in Time Warner Entertainment;

  • insulate their ownership interests in Time Warner Entertainment by ending involvement in Time Warner Entertainmentís video programming activities, which entails selling AT&Tís programming interests, including Liberty Media Group; or

  • divest their interests in other cable systems, which involves divesting cable systems serving approximately 11.8% of cable and satellite subscribers nationwide (i.e., more than 9.7 million subscribers, which is more than half of AT&Tís current subscribers).

We rejected AT&Tís argument that our 30% ownership cap and ownership attribution rules do not apply to its merger with MediaOne. We also denied its request to grant the merged entity flexibility to comply with whatever ownership limits are in effect in 18 months. Neither of these options would have served the public interest.

Second, our conditions are strict and enforceable. AT&T must comply with specific interim conditions and enforcement mechanisms designed to protect the public interest while the merged entity completes these divestitures.

Third, some parties have urged us to impose an ďopen accessĒ condition on the merged entity. We have declined to do so here. As I have noted previously, the development and deployment of high-speed, broadband Internet access is vitally important to the nation as it will deliver the next generation of Internet services to Americans. Consumers should have a choice among alternative broadband providers. I believe that there are powerful marketplace incentives to ensure that consumers have such choices. Therefore, I have consistently advocated that we allow the nascent broadband marketplace a chance to develop before imposing a government-ordered regime.

I have been encouraged by voluntary commitments by AT&T and other cable operators to open their systems so as to accommodate consumer choice. Indeed, AT&T has made these commitments to the FCC on the record in this proceeding, including the commitment that they will not restrict video streaming. Notwithstanding these commitments, however, we have yet to see a fully developed and functioning system that provides broadband service alternatives to consumers. Therefore, my continued support for the Commissionís vigilant restraint policy ultimately depends on how AT&T fulfills its voluntary commitments in the broadband arena.

Like the American public, I look forward to seeing the benefits that the combination of AT&T and MediaOne will bring. In the meantime, I will be working hard to ensure that no single company can act as a bottleneck or gatekeeper in terms of Americansí access to a wide variety of programming content through multiple pipes and providers.