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Press Release Monday, June 26, 2000 |
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WASHINGTON, D.C. -- Consumers Union says that the ownership links
between Time Warner, Inc., and the recently-merged AT&T and
MediaOne are a violation of the conditions that the Federal Trade
Commission set for a previous merger - Time Warner's
acquisition of Turner Broadcasting System, Inc.
Gene Kimmelman, Co-Director of CU's Washington DC office, is
sending a letter to FTC Chairman Robert
Pitofsky to request an investigation of the links between Time Warner
and AT&T with the hopes that the FTC will require them to
eliminate their overlapping interests in cable distribution and
programming.
"The AT&TMediaOne merger gives AT&T a 25 percent
stake in Time Warner Entertainment, which includes virtually all of
Time Warner's cable systems, as well as HBO, Cinemax, and other cable
channels," said Kimmelman. "We believe this is a violation of the
terms set by the FTC's previous consent agreement for the merger of
Time Warner and Turner Broadcasting, which was designed to prevent
increased monopoly power in the cable TV business.
"We think that the FTC should require AT&T to sell its
interests in Time Warner Entertainment, or the FTC should require
Time Warner to restructure itself so that it and AT&T do not
jointly own cable properties as a prerequisite of its merger with
America Online," he said.
As a precondition of Time Warner's acquisition of Turner
Broadcasting in 1997, the FTC required the cable TV corporation
Tele-Communications, Inc. (TCI) to limit its ownership interests in
Time Warner. The FTC believed that the potential links between TCI
and Time Warner - which were then the two largest cable providers in
the nation -- could allow the companies to seriously reduce
competition in cable distribution and cable TV programming.
AT&T bought TCI in 1999 and assumed TCI's legal obligations
under the FTC's consent agreement regarding Time Warner and Turner.
AT&T acquired MediaOne earlier this year. While the Federal
Communications Commission (FCC) required AT&T to sell some of its
cable interests as a condition of the MediaOne merger, the FCC did
not require AT&T to sell its stake in Time Warner Entertainment
and therefore did not ensure that the FTC's ownership limits under
the Time Warner-Turner consent decree would be met.
"It is clear that the ownership links between AT&T and Time
Warner violate the language and the intent of the FTC's consent
agreement for the merger of Time Warner and Turner," said Kimmelman.
"Therefore, Consumers Union believes that, in addition to the
antitrust and communications law violations caused by these links,
the companies are violating a consent decree and should be required
to abide by the ownership limits they agreed to in that decree.
"The concerns that led the FTC to require TCI to sever its links
with Time Warner before it bought Turner apply more forcefully now.
With AT&T's acquisition of MediaOne and the pending merger of
Time Warner and AOL, these two corporate giants would control over
half of America's cable lines and nearly half of the most watched
channels on cable TV. They would also control access to more than
half of the narrowband Internet subscribers and three-quarters of the
high-speed, broadband Internet customers.
"The power that AT&T and AOL-Time Warner would wield could
seriously undermine competition and leave consumers paying inflated
prices for cable TV and high-speed Internet services. That is why we
are asking the FTC to investigate these links and require the
companies to sell their overlapping cable interests."
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.
