Comcast bid should fail

Even if AT&T’s board accepts the bid for AT&T Broadband, chances are the FCC will nix the deal. 7/11 ReleVents hed: Comcast bid should fail dek: Even if AT&T’s board accepts the bid for AT&T Broadband, chances are the FCC will nix the deal. By James Mathewson

The buzz in the industry right now surrounds Comcast’s hostile takeover bid for AT&T Broadband. A news item on our site today indicates that the bid is significantly lower than it should be. But analysts quoted in the story say if AT&T accepts a higher bid, it would deliver more shareholder value to AT&T shareholders than its planned IPO when the company is spun off later this year.

Comcast’s low-ball bid is not the only thing in the way of the takeover, however. A larger issue that I see is Federal Communications Commission (FCC) approval. Remember that a U.S. court of appeals overturned the FCC’s cable ownership rules earlier this year. Prior to the ruling, the FCC would not allow a single cable company to own more than 30 percent of all cable subscribers.

Former FCC Chairman William Kennard tried to force the cable ownership issue by making AT&T divest itself of some cable properties as a condition of the AT&T/MediaOne merger. AT&T filed suit against the FCC; the court sided in favor of AT&T, and now there are no legal limits on cable ownership. However, the court did open the door for future cable limits by giving the FCC the opportunity to reconsider the rules and perhaps reissue them later in a different form. One condition of reissue would be consent of Congress.

Comcast’s takeover would give it nearly half of all cable markets in the country. Not only would this violate the letter of the former ownership caps, it would grossly violate their spirit. Even if FCC Chairman Powell is inclined to accept the merger, his agency is under congressional review. Since the Democrats took over in the Senate, the tenor of telecommunications competition has changed. (Yes, cable is now telecom, because of voice-over IP.) My hunch is that the Senate and certain key members of the House will not take this merger lying down and will force the FCC to take aggressive action to prevent it.

As business-friendly as the FCC now is, it can’t in good conscience allow this merger. Cable competition would be down to two major players and one minor one. The rule of thumb is, the larger the company, the tougher it is on consumers, especially in the wake of a major merger. There simply are not enough resources to adequately serve consumers when a company reaches a certain size rather quickly. And we have ample evidence of this in recent years with all the mergers and acquisitions in Regional Bell Operating Companies and cable companies. So this merger is bad for consumers.

My hope is that if AT&T’s board accepts this merger, the FCC, led by strong congressional backing, will move to block it.

James Mathewson is editorial director of ComputerUser.com and ComputerUser magazine.

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