Press Release Tuesday, August 17, 1999

Contact: Gene Kimmelman/David Butler, butlda@consumer.org (202) 462-6262 Consumers Union Washington, DC Office

WASHINGTON, D.C. -- Consumers Union (CU)(1), Consumer Federation of America (CFA)(2) and Media Access Project (MAP)(3) today filed a formal request with the Federal Communications Commission (FCC) and Justice Department's Antitrust Division to block the acquisition of MediaOne by AT&T Corp.

The groups filed a detailed economic analysis demonstrating that the merger violates both the antitrust laws and the market concentration limits mandated by Congress and administered by the FCC.

CU, CFA and MAP technically asked that the FCC vacate the voluntary stay of its "horizontal ownership" rules, which set an upper limit on how many subscribers any cable operator may reach. The report cites several examples of irreversible harm that consumers would suffer as a result of the AT&T/MediaOne deal, including higher cable and broadband Internet prices, inadequate competition for these services, and stifling of diversity and the free flow of ideas.

The groups' economic analysis supporting the motion was also filed at the Department of Justice, accompanied by a letter seeking immediate antitrust intervention to block the merger.

"By combining cable monopolies that serve as much as 60 percent of the country, dominating popular cable channels and controlling critical Internet services, AT&T is attempting to thwart the development of competition through its acquisition of MediaOne," claimed Dr. Mark Cooper, CFA's Research Director and author of the economic analysis entitled 'Breaking the Rules.'

"If this merger is not blocked, consumers will continue to see their cable rates soar and begin to face inflated prices for new high-speed Internet services," charged Gene Kimmelman, co-director of CU's Washington office.

"Failure of the FCC to reactivate its rule that prohibits an enormous cable company like AT&T from dominating the market would make it impossible for tomorrow's high-speed Internet to develop into as open and democratic a medium as today's Internet services," warned Andrew Jay Schwartzman, MAP President and lawyer who prepared the groups' legal filing at the FCC.

The groups' analysis shows that the AT&T/MediaOne merger would violate the Communications Act and antitrust laws because AT&T could use its control over a majority of the country's cable properties, dozens of the most popular cable TV channels, ownership of the two dominant high-speed Internet services, and preferential deals with set top box makers to:

1. Thwart satellite, telephone or other cable companies from competing to offer consumers lower prices, higher quality and better choices for television services;

2. Give its affiliates @Home and Roadrunner financial and technical advantages in offering broadband services, driving up high-speed Internet prices for consumers and Internet service providers, and preventing some independently-owned broadband services from reaching consumers; and

3. Leveraging preferential marketing deals with set top box makers (like Microsoft) and other service providers to maximize control over the development of new services that could compete with the cable broadband package of services.

"AT&T's promise to some day compete to offer local telephone service does not outweigh the cable and Internet price hikes and damage to competition that immediately result from this merger," Dr. Cooper noted.

"If the Clinton Administration still stands behind the principles it promoted in the 1996 Telecom Act - stopping market concentration that drives up prices, harms competition and limits diversity of ownership - it must take immediate steps to stop AT&T from blatantly disregarding those principles," Kimmelman added.

"Today the public interest community clearly and unequivocally calls on this Administration to enforce the laws against monopolizing essential communications services by blocking the AT&T/MediaOne deal," Schwartzman concluded.
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(1) Consumers Union, Publisher of Consumer Reports magazine, is an independent nonprofit testing, educational and information organization serving only the consumers. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition and other consumer concerns. Since 1936, our mission has been to test products, inform the public and protect consumers.

(2) The Consumer Federation of America is the nation's largest consumer advocacy group, composed of over two hundred and forty state and local affiliates representing consumer, senior, citizen, low-income, labor, farm, public power an cooperative organizations, with more than fifty million individual members.

(3) Media Access Project is a twenty-four year old nonprofit, public interest law firm that represents the interests of the public to speak and to receive information via the electronic media of today and tomorrow.