- The Washington Times - Friday, December 21, 2001

NEW YORK (AP) AT&T; and Comcast Corp. executives touted their blockbuster cable merger yesterday as a way to provide television, Internet and telephone service to a fifth of America's households at competitive prices.

But the $45 billion stock deal to merge the No. 1 and No. 3 cable providers was condemned by consumer advocates who doubt prices will go down and fear that much control in the hands of a single company.

The opposing views are sure to dominate debate over whether regulators in Washington should approve the deal to create a company with 22.3 million subscribers almost double the size of the closest rival, AOL Time Warner.

The new company, to be called AT&T Comcast Corp., will provide competition in local telephone markets and give consumers "greater choices at very competitive prices," AT&T chairman and chief executive C. Michael Armstrong said in an interview. "This just couldn't be better for the consumer."

Jeff Chester, executive director of the Center for Digital Democracy, said the merger will give one company leverage over too many consumers' communications needs.

"Americans should be very worried about how this new combination will affect what they pay each month for cable and Internet service," Mr. Chester said.

Cable company executives don't have a good track record of predicting the direction services will take, he noted.

More than five years ago, before AT&T went on a buying binge of cable companies, they forecast that phone service would be widely available through the same fiber-optic cable. That hasn't come true yet.

Analysts said the future will bring progress, but perhaps more gradually than the industry's cheerleaders reckon.

"I remember when we were going to get all of our services through our phone jack as late as 1993, but that died a pretty quick death," said Laura Behrens, a media analyst with the Gartner G2 unit of research group Gartner Inc.

It may take years, but the merger will eventually allow consumers more seamless access to various services through cable connections, she said.

"Whether that is a price that consumers find attractive is a fairly major question," Ms. Behrens said.

On average, basic cable television service costs about $38 and a high-speed internet connection $40 to $50 not including any installation or startup fees or the costs of equipment like modems.

If regulators approve the AT&T-Comcast deal, the merger is expected to be completed at the end of next year. Mr. Armstrong will become chairman of AT&T Comcast and Comcast President Brian L. Roberts will be chief executive.

In the interview, they said they would share the responsibility of running the company, but that Mr. Roberts would have control over day-to-day management.

Under the terms of the deal, AT&T Comcast will assume $25 billion in debt, including $5 billion of the AT&T Broadband debt held by Microsoft that will be converted into shares of the new company.

In a news conference, Mr. Roberts sidestepped questions over how many jobs may be cut as the two companies combine operations. But he acknowledged that some of cost-saving measures will include eliminating overlapping positions.

AT&T's Denver-based cable unit has 40,000 employees, while Philadelphia-based Comcast has 35,000.

Determining the size of the work force and the future of the Denver operations will be up to a transition team expected to start working soon on an integration plan for the new company.

Both Mr. Roberts and Mr. Armstrong said they have decided that AT&T Comcast's headquarters will be in Philadelphia, with an executive office in New York, where AT&T is based.

The merger is the largest for 2001, and came five months after AT&T rejected a bid by Comcast to buy the cable business for $41 billion. After a bidding process, AT&T's board chose Comcast's revised bid and rejected proposals by AOL Time Warner and Cox Communications.

AT&T shares rose $1.05 a share, or 6.3 percent, to $17.85 yesterday on the New York Stock Exchange. Comcast shares fell $2.28, or 6 percent, to $35.79 a share on the Nasdaq Stock Market.

The new company will have cable subscribers in 17 of the country's 20 largest metropolitan areas and a presence in 41 states.

AT&T's shareholders will own a 56 percent stake in the company and a 66 percent voting interest. Members of the Roberts family, who hold an 86 percent stake in Comcast, will control about a third of the new company's voting power.

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