AT&T BROADBAND-COMCAST NONDISCLOSURE OF INTERNET DEAL QUESTIONED
Coalition of consumer groups asked FCC to cease its review of proposed merger of AT&T Broadband and Comcast until companies disclosed agreement that gives AOL carriage on what would be merged company’s high-speed Internet lines. FCC already had issued protective order with confidentiality provisions, allowing parties willing to sign it to examine certain proprietary information submitted by companies on merger. Despite those protections, AT&T and Comcast, as of our deadline, had not submitted to FCC 3-year nonexclusive agreement that makes AOL High-Speed Broadband available to homes served by what would be merged AT&T Comcast. “If the applicants [AT&T and Comcast] do not trust the Commission to follow its own rules and decline to risk providing the Commission with copies of the agreement, the applicants can withdraw their merger application,” said petition filed by Consumer Federation of America (CFA), Consumers Union, Center for Digital Democracy, Media Access Project. Consumer groups contended that Internet agreement was crucial to determining whether AT&T Comcast would have unfair market power over broadband Internet. Comcast spokesman hadn’t returned phone call seeking comment by our deadline.
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Last month, when AT&T, Comcast and AOL-Time Warner announced they had come to agreement to unravel their complicated partnership -- Time Warner Entertainment (TWE) -- FCC Media Bureau Chief Kenneth Ferree said companies hadn’t released financial terms on carriage of AOL (CD Aug 22 p1). He told us FCC probably would ask for those details: “I hope at some point we'll have them in here and actually explain to us how this is going to work.” Since then, attorneys for Comcast and AT&T have been lobbying FCC on behalf of merger, but whether financial details of AOL carriage agreement ever were disclosed to Commission officials in those meetings couldn’t be determined based on ex parte filings made available to public. Ferree was not in his office Thurs. and couldn’t be reached for comment. FCC sources said Commission had not yet asked for copy of carriage agreement but wouldn’t hesitate to do so if deemed necessary. “We're never shy about asking for more information. We're always very aggressive about saying, ‘We need more information and we can’t do another thing on this merger until we get it,'” FCC official said. One example of that was EchoStar-DirecTV review, which was stopped earlier this year for that reason.
Consumer groups said FCC was under statutory obligation to review carriage agreement before allowing any merger to go forward. “If the applicants refuse, the Commission must ’stop the clock,’ as it did in the DirecTV/EchoStar merger, until the applicants comply,” groups wrote. Clock on merger already has stopped pending completion of pleadings on TWE interest. Consumer groups cited news reports that AOL’s carriage agreement came at hefty price and said that was proof that combined AT&T Comcast would wield unprecedented power over broadband. “AOL Time Warner agreed to highly unprofitable terms, representing a full retreat for AOL in the face of AT&T Comcast’s superior market power,” groups said in filing. At time of TWE announcement, companies held out agreement as example of marketplace at work, without govt. intervention.
Consumer groups appeal came on day comments were due on proposal by AT&T and Comcast to insulate their TWE interest from merged company through trust. They have said they wanted to sell off those assets, move widely thought to be nod to federal regulators concerned about 30% horizontal ownership cap on cable companies. But until those assets are sold, companies have said they would place TWE assets in trust, with govt.-approved trustee overseeing operation and sale. At our deadline, few comments had been posted to FCC Web site on that aspect of merger, but those submissions typically come late in day.
Comments instead focused on overall merger and on current market battles between Comcast and RCN and between AT&T and Prime Communications. Overbuilder RCN said it believed Comcast had engaged in what it called predatory pricing, offering “highly aggressive discounts” in areas where RCN was competitor in order to force RCN out of market. Comcast responded in its own filings that its pricing and marketing practices were lawful and natural responses to growth of competitive alternatives. Prime accused AT&T Broadband of monopolizing cable ad markets in Mass. and N.H., saying company had refused to allow Prime to buy cable ads for its customer car dealers. AT&T Broadband told FCC that those allegations were subject of federal court litigation and that it was private dispute to be handled by courts, not FCC.