OPEN ACCESS STILL ISSUE IN AT&T-COMCAST TRANSFER APPLICATION

Various court decisions on open access that have resulted in limiting LFAs’ authority and FCC decision classifying cable modem as information service sets up legal uncertainty on whether state-based antitrust laws are applicable, Miller said. Issue is likely to come up in some jurisdictions, he said, although it’s unpredictable what action will be taken. Problem with FCC taking cable modem out of definition of cable service, he said, is that it removes some level of regulatory protection that service enjoyed and created antitrust uncertainty. For example, he said cable service enjoyed tariff protection and new FCC ruling could open service to state or federal antitrust rules as with any other business. LFAs will be interested in voluntary carriage deals for independent ISPs, attorney James Baller said, because AT&T and Comcast have different “philosophies” on issue. Miller said LFAs could look at whether transfer should be conditioned to ensure that transmission of content via Internet wasn’t affected by transfer. Attorney Adrian Herbst, who has handled many Comcast and AT&T franchise renewals for cities, said companies would be asked about their open access polices regardless of FCC’s decision.

Customer service, especially complaints relating to cable modem service, will figure prominently among issues raised by LFAs, lawyers said. AT&T is reducing its work force dramatically, Miller said, and issue will be whether merged entity intends to fill those customer service positions. Other factors that could crop up, he said, include whether companies will begin sharing information for cross-marketing purposes, existence of meaningful protections against slamming (transferring long distance customers to new companies without their permission) and cramming (loading customer telephone bills with charges for services they didn’t expect or didn’t affirmatively order). Comcast recently was revealed to be monitoring and selling consumer- specific information on cable modem usage (CD Feb 14 p7), Miller said, and problem could be whether customer privacy would be protected. Question whether AT&T attempts to impose binding arbitration on customer disputes in some markets will be implemented in other markets will also be pursued, he said.

AT&T recently has had substantial “trouble” over customer service in number of cities, Baller said, and for such communities significant issue will be what merged entity proposes to do to improve service. Comcast isn’t entirely free of customer service compliance issues either, he said. Many LFAs had witnessed “turmoil” in customer service after AT&T’s acquisition of TCI and MediaOne, Herbst said. For instance, he said, City of Ft. Lauderdale, Fla., had to amend cable ordinance to set more stringent customer service standards in face of mounting complaints. Companies will be asked whether AT&T policies will remain or improvements will be made. Customer service and institutional network (I-Net) issues will figure prominently in Portland (Ore.), said Marshall Runkell, aide to that city’s Comr. Eric Sten. AT&T had cut back on customer services resources, he said, and city had started discussions with company on issue.

On financial aspects, LFAs will be looking at whether there are real streams of revenue that can support transaction, Miller said. AT&T Broadband has worst cash flow margins in industry, he said, while Comcast exceeds industry average. There will interest to see how the 2 companies’ financial performances are merged, he said. Baller said it was complicated merger with great complexity in corporate structure, and LFAs would be keen to know who was going to stand behind performance obligations. Herbst said questions would be raised about merged entity’s ability to rebuild cable systems. Comcast has been way ahead in upgrading systems, he said, but AT&T hasn’t been up to scale. LFAs would like to know whether Comcast would fulfill AT&T’s upgrade obligations. Technically, transfer doesn’t authorize cities to reopen franchise for negotiations, Herbst said, but it has happened. Evaluation of compliance of existing franchises has led to reopening negotiations, he said, with issues then brought to table. Issues such as default on franchise fees and customer service standards can lead to renegotiation of certain aspects of franchise agreement, Herbst said. In cases where franchises are coming up for renewal, LFAs can examine effect of transfer on renewal, he said.

Municipal and private overbuilders have accused AT&T and Comcast of resorting to “predatory” pricing to drive out competitors. While cities such as Scottsboro, Ala., and overbuilder Knology have petitioned FCC for relief, WideOpen West (WOW) asked 42 communities in Mich. (Comcast) and 35 in Ill. (AT&T) to deal with issue of MSOs offering “selective unpublished discounts” and lower prices while reviewing transfer applications (CD April 5 p7). Even when FCC deems MSO is in effective competition in franchising area, freeing it from rate regulations, LFAs have some residual rate regulation authority, Miller said. Local authorities also can look into compliance with uniform rate regulations, he said.