BY SHABINA S. KHATRI
Daily Staff Reporter
Published November 21, 2002
Amidst criticism from consumer groups and governmental officials, the $47.5 billion acquisition of AT&T Broadband by Comcast Corp. happened early this week, creating the nation's largest cable company and fueling suspicions of a monopoly.
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The deal took place less than a week after the Federal Communications Commission approved the acquisition by a vote of 3 to 1, with Commissioner Michael Copps stating the lone dissent.
The combination of AT&T Broadband and Comcast, the largest and third-largest cable networks, respectively, to form AT&T Comcast creates a potential for abuse too overt to ignore, Copps said in his dissenting statement.
"The sheer economic power created by this mega-combination, and the opportunities for abuse that would accompany it, outweigh the very limited public interest benefits that either the Applicants or the majority find here," he said.
"The more I review the issues at stake in this proposal, the more I am persuaded it should not go forward."
While citing accelerated rollout of high-speed Internet and increased supply as major public benefits, the FCC decided to approve the acquisition on the condition that AT&T Comcast sell its 27.64 percent ownership interest in Time Warner Entertainment, L.P, a subsidiary of AOL Time Warner, the second largest cable network in the country.
Michelle Russo, an FCC media relations representative, said the sale was necessary to prevent the possibility of complicity between the country's three largest media conglomerates.
"It's very complicated but the point is we didn't want the new combined AT&T Comcast to have a relationship with AOL Time Warner because that's a huge media company," she said.
"On the day the merger closes they have to start to get rid of that interest in Time Warner Entertainment by putting the interest in a trust. (They) still own it but have no control over it, and the government is giving them five-and-a-half years to ultimately sell it."
Valerie Suslow, associate professor of business economics, said the FCC and the Department of Justice take into account many factors when approving business mergers between large companies.
"Mergers of that size aren't necessarily illegal; they have to be reviewed on a case-by-case basis," she said. "Would they have too much market power as a combined entity? How much does cable have to compete with regular broadcast TV, radio, DVD? If you start expanding your idea of what really is the market and who the competitors are ... (AT&T Comcast) can be defined broadly as entertainment."
The University owns stock in both AT&T and Comcast, which were down the day of the merger.
But Jonathon Sickinger, an investment analyst at the University's Investment Office, said the loss had a minimal effect on the overall endowment.
"We own 55,921 shares of AT&T and have about 224,000 shares in Comcast. We lost maybe $5 million (on Monday)," he said. "It's going to have a negligible impact on the endowment - which is $3.5 billion - as a whole."