FCC SUSPENDS DEADLINES FOR AT&T CABLE DIVESTITURE

Suspension of deadlines lifts pressure off AT&T to sell its TWE stake back to AOL Time Warner (AOL TW) or spin off Liberty Media over next 2 months. Although AT&T has been trying to do both to slice its huge debt load, it has run into resistance from AOL TW in negotiating price for TWE stake and needs favorable tax ruling from IRS to go forward with Liberty Media option. If AT&T couldn’t have met May 19 divestiture deadline, it would have had to start process to put its TWE stake in trust until it could carry out sale. AT&T said Mon. it continued to negotiate TWE sale with AOL TW, even though 2 companies had passed their latest March 15 deadline for settling matter.

Move came week after AT&T and FCC Comr. Furchtgott-Roth urged Commission to take step because of March 2 court decision striking down cable’s 30% ownership cap (CD March 13 p2). Furchtgott-Roth also urged Commission to drop AT&T divestiture conditions in wake of court action. Ruling is relevant because FCC found AT&T to have 42% share of pay-TV market following its $44 billion purchase of MediaOne last June, well in excess of cap.

Suspension of AT&T divestiture conditions also came same day as FCC rejected Viacom’s bid to suspend its deadlines for selling local TV stations that exceeded Commission’s 35% ownership cap for broadcasters. Viacom, which faces May 4 deadline to sell stations because of its $50.2 billion purchase of CBS last spring, had argued that it should be granted relief at least partly because of cable cap ruling. But, again in 3-1 vote, Commission turned down Viacom’s request, saying company had failed to prove postponement was justified. Viacom said it would appeal decision to U.S. Appeals Court, D.C., which also is hearing challenge to broadcast ownership limits.

FCC Chmn. Powell said that while cable ownership cap was “not the sole basis on which the Commission imposed conditions” on MediaOne deal, agency “unquestionably relied on substantially similar rationale” pulled from rule that appellate court struck down. “Given that fact, it is only prudent for the Commission to suspend its enforcement of the condition until it has adequate time to carefully consider the impact of the court’s decisions on the conditions,” he said. “Our action should not be read as eliminating the condition, but only as suspending the established benchmarks for compliance pending further consideration.”

In separate statement, Comr. Ness stressed that “our action today is a suspension, not an elimination of the conditions” imposed upon AT&T and said she had been assured that Commission “will act expeditiously” to respond to appellate court ruling. While she voted for order, Ness said she was “deeply concerned about increasing levels of concentration across the media industries,” including “the relative dearth of nonvertically integrated cable television programmers and the difficulty such programmers have in reaching wide audiences.” She urged FCC to “remain vigilant in promoting diversity in the media marketplace.”

Comr. Tristani, lone dissenter in case, blasted action, arguing that it “effectively eliminates the requirement that AT&T divest” its TWE holdings and “eviscerates the public interest protections” in agency’s original MediaOne order. She also called move “premature and unjustified” in absence of final court order or formal AT&T request for relief. “The Commission’s action once again sends the signal that it cares more about the interests of large corporations than it does about maintaining a vibrant and diverse marketplace of ideas,” she said.

Tristani also argued that FCC originally imposed conditions on AT&T to serve public interest, not just to meet cable ownership cap, and made conditions “nonseverable” from license transfer grant. She said suspension “creates a dangerous precedent” because Commission acted without formal request from AT&T or chance for public comment. “A cynical reading of the Commission’s action here suggests it is open season on public interest obligations appearing in prior orders,” she said. “The Commission is skating on thin ice and the water beneath it is deep, dark and very cold.”

AT&T hailed Commission’s move. “The FCC has taken a reasonable, measured step today in light of the Appeals Court ruling earlier this month,” AT&T Gen. Counsel James Cicconi said. “We will work with the FCC as it continues to deal with the court ruling and its implications.”

Consumer groups criticized FCC’s action. “It smells to high heaven of favoritism for the largest cable monopoly, AT&T,” said Gene Kimmelman, co-dir. of Consumers Union’s Washington office. “It sends a clear signal that under new leadership, the FCC does not plan to impose meaningful ownership limits on cable monopolies. If it’s true that the FCC needs more time, why doesn’t this order create a new deadline for the Commission itself to make a determination as to the impact of this court case?”