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Comcast Bid Sparks Debate at NECTA

Newport, R.I.— Comcast Corp.'s bid to form a 22-million-subscriber cable giant by acquiring AT&T Broadband shouldn't be ruled out based on its unprecedented size, a Cox Communications Inc. official said here Tuesday.

Jayson Juraska, Cox's vice president of development, said consumer choice in the market wouldn't change if Comcast succeeded in buying AT&T's cable unit.

"I think there are plenty of checks in the marketplace," Juraska said. "The consumer is the ultimate hammer. There are plenty of places for the consumer to go if they feel they are being mistreated."

He noted that a cable-video subscriber could turn to direct-broadcast satellite, a cable data subscriber to digital subscriber line service and a cable telephony subscriber to the incumbent provider.

"I have heard that there is some concern simply about the size of AT&T and Comcast combined. I don't think that should be a huge, huge concern," Juraska said at the New England Cable Television Association convention. "I am not really worried about some of the market power that I have read about."

AT&T is reportedly entertaining offers from parties other than Comcast, but Verizon Communications, the dominant local phone company from Virginia to Maine, is not interested in acquiring cable systems.

"We have been down that path and there is little likelihood … that Verizon is going to move into video via purchase of a cable company," said Tom Tauke, Verizon's senior vice president of public policy and external affairs.

Tauke mentioned that Bell Atlantic Corp. (which merged with GTE Corp. to form Verizon) sought to acquire Tele-Communications Inc. in 1993, but the deal crashed.

"That didn't happen — I think, thankfully," Tauke said. "I don't think you can look for us to be going after a cable company."

W. Kenneth Ferree, chief of the Federal Communications Commission's Cable Services Bureau, said his staff is "feverishly reworking" cable-ownership rules that were tossed out by a panel of the U.S. Court of Appeals for the District of Columbia Circuit on March 2.

The FCC, Ferree said, wanted to guard against one cable company becoming so large that it could obtain monopsony power, or the ability to make or break a cable network that failed to obtain carriage with it.

"We are concerned about the extent to which a large MSO could exercise sort of large monopsony power in the program-access markets," Ferree said. "It is the extent to which an independent programming service could survive without the theoretical large MSO buying their programming."

With or without cable-ownership rules on the books, the FCC has the necessary authority to review a large cable merger submitted for approval, he added.

"If even if we don't have our horizontal ownership rules promulgated by then, we have statutory authority to do the review on a case-by-case basis, and we would do that," Ferree said.

The FCC rule struck down in court held one cable company to 30 percent of all pay-TV subscribers. A Comcast-AT&T combination, with 22 million cable subscribers, would equal 25 percent of all pay-TV subscribers.

Adelphia Communications Corp. vice president and general counsel Randy Fisher said the tax structure of the cable industry and the cost structure associated with new technology drives MSOs to sell or get bigger. Comcast, he said, opted to grow.

"For Comcast to say we want to buy AT&T, they may be looking at an economic model that says that with that kind of clustering, with that kind of environment, I can really compete better with" local phone companies, Fisher said.