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Federal Internet Law & Policy
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AT&T Cable Broadband		 Dont be a FOOL; The Law is Not DIY



Divestiture broke AT&T up into AT&T Long Distance and the local Bell Operating Companies. Long distance, in the 1990s, was an exciting market that held financial promise to the local networks; the Telecommunications Act of 1996 used entrance into the long distance market as a carrot to entice BOCs to open their local markets to competition. Sec. 271.

The long distance market was already competitive (with MCI, Sprint, and others) ~ long distance providers such as AT&T had no regulatory restriction on entering the local market. But how could AT&T long distance enter the local market? Overbuild a new physical network (fighting for UNEs, pole attachments, right of ways, and interconnection like the other CLECs?)? Acquire a BOC? Couldn't do that because the BOCs themselves had yet to open their local markets up to competition and receive permission to enter long distance (as Verizon would confront when it acquired GTE and had to divest itself of the Genuity network).

A third option presented itself: Cable video networks were innovating and converting their cable video delivery infrastructure into bidirectional data networks. They were smaller; they were experimental; and they were of varying degrees of success. AT&T long distance could get a foothold into the local network market by acquiring local cable networks and maturing their telephone and data products. [Economides ("AT&T unveiled an ambitious strategy of reaching consumers' homes by using cable television wires for the "last mile."")]

AT&T successfully glued together a sizeable cable broadband footprint. Internet services were provided by RoadRunner and Excite@home. [Economides (TCI "together with Time Warner and MediaOne, AT&T could reach a bit more than 50 percent of U.S. households.")]

AT&T's acquisition of these cable broadband networks gave rise to the pre-network neutrality debate of Open Access. Arguing that the cable broadband networks were telecommunications services and fell under Computer II, advocates including Earthlink argued that AT&T should be required to unbundle its underlying telecommunications service (the underlying cable Ethernet network) from its enhanced service (the broadband Internet) and make the underlying telecommunications service available to other providers on the same terms and conditions. At this time, Internet over DSL was considered a telecommunications service and did fall under these obligations (to a certain vague degree). This created a discontinuity between the treatment of Internet over cable and Internet over DSL, and advocates argued that the traditional Internet over DSL was the correct policy outcome. In effect, advocates argued, a subscriber to a cable system should be able to use the cable network to reach the ISP of their choice. [Lemley] Open Access arguments were not persuasive with the FCC. Open Access was not adopted as a merger condition and, in 2002, the FCC issued a declaratory ruling that Internet over Cable was an information service and therefore did not fall under Title II common carriage obligations or Computer II. This conclusion was affirmed by the Supreme Court in Brandx.

And then, after huge investments and upgrades, in 2002, AT&T sold that local cable broadband network to Comcast. [Economides ("Facing tremendous pressure from financial markets, slow cable conversion, and a steep reduction in long-distance revenues, AT&T decided on a voluntary breakup into a wireless unit, a cable TV unit, and a long-distance and local service company that retained the name AT&T and the symbol "T" on the New York Stock Exchange.")] [Comcast Dec. 19, 2001 ("Under the terms of the definitive agreement, AT&T will spin off AT&T Broadband and simultaneously merge it with Comcast, forming a new company to be called AT&T Comcast Corporation.")] [Comcast, AT&T Broadband in $52B Deal, ABC Dec. 20] [Solomon ("It caps a bumpy three-year odyssey in which it acquired two cable companies in a largely unsuccessful attempt to transform itself into a telecommunications powerhouse before announcing a full-fledged breakup late last year.")] [The New AT&T 2005 ("The company also announces a withdrawal from the consumer market to focus on business networking and VoIP.")]

Comcast would emerge with a dominant share of the Internet over broadband market, and would build its own long distance Internet backbone. By 2010, Comcast would be the largest Internet over broadband company. In 2005, the Bell Operating Company SBC would acquire AT&T long distance - merging the local network assets of SBC with the long lines of AT&T - rebranding itself as AT&T.

AT&T Broadband / Comcast

AT&T / Excite @Home

Timeline

News

ATT / MediaOne Merger Proceeding

"On July 7 and 15, l999, AT&T Corp. ("AT&T") and MediaOne Group, Inc. ("MediaOne") filed joint applications under Sections 214 and 310(d) of the Communications Act, 47 U.S.C. Sections 214, 310(d), requesting Commission approval of the transfer of control to AT&T of licenses and authorizations held by subsidiaries of MediaOne and entities controlled by MediaOne. This transfer of control would take place as the result of a merger of AT&T and MediaOne, with AT&T becoming the parent company of MediaOne. After the merger, MediaOne would be merged into a wholly-owned subsidiary of AT&T. The licenses and authorizations currently held by MediaOne subsidiaries or entities controlled by MediaOne would continue to be held by those entities, as controlled indirectly by AT&T. 

"On June 5, 2000, the Federal Communications Commission gave a conditioned approval to the transfer of control of licenses and authorizations from MediaOne to AT&T. The FCC ordered AT&T within six months of completion of the merger to inform the Commission what interests it will divest to come into compliance with the FCC's horizontal ownership rule. This rule prohibits a single cable company from serving more than 30% of the nation's multichannel video programming distribution subscribers, who are served primarily by cable television and direct broadcast satellite services. The FCC concluded that the merged firm without divestitures would have served 41.8% of the nation's MVPD subscribers. For further details: [Order: MS Word | Text | News Release ]"
 

Merger was approved on the conditioned divestiture of the Road Runner service. "The merger as proposed would have had an anticompetitive impact on the emerging broadband market... The divestiture assures that AT&T will not acquire undue leverage in its dealings with broadband content providers, and American consumers will be the ultimate beneficiaries.' Under the terms of the proposed consent decree, AT&T is required to exit the Road Runner joint venture no later than December 31, 2001." Press Release, US DOJ, Just Dept Requires AT&T to Divest MediaOne's Interest in Road Runner Broadband Internet Access Service (May 25, 2000)

Hearing 

On Friday, February 4, 2000, the Cable Services Bureau convened a Public Forum on the proposal of AT&T and MediaOne to transfer to AT&T the control of licenses and authorizations held by subsidiaries of MediaOne and entities controlled by MediaOne. The following are documents related to that public
forum: 

    [ Public Notice: MSWord | Text ] 
    [ Agenda and Speakers: MSWord | Text ] 
    [ Questions the Bureau has asked panelists to address: MSWord | Text ] 
    [ Transcripts of the forum: MSWord | Text ] 

News

AT&T / TCI Merger 1999 CS DOCKET NO. 98-178.

References

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