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Should I be worried?

by Scott Bradner

My telephone long distance provider is AT&T. My cable TV and Internet service provider is MediaOne. Now it seems that I'll be getting all three services from AT&T. That in itself is not a reason to worry but that are aspects to this deal that have me wondering.

AT&T is paying about $4,700 per subscriber for MediaOne. This deal is the latest in a year in which AT&T will have spent almost $110 billion, just about twice it $53 billion revenue for 1998, for cable TV companies. I sure hope that AT&T will not try to recover all of there $4,700 out of my cable bill next month.

AT&T wanst to use this newly acquired last-mile connectivity to offer local and long distance phone service and Internet service without having to deal with the local Baby Bell telephone companies. I can easily see why any organization with half a clue would want to avoid depending on the Baby Bells to deploy any technology more sophisticated than a Princess phone. Take a look at the mind numbing slowness with which the Bells deployed ISDN service and the equivalent, at best, deployment strategy for DSL.

There are some significant regulatory issues AT&T will face. FCC chief Kennard said that the MediaOne deal "warrants very careful scrutiny," and according to the FCC, AT&T cable ownership will far exceed the 30% of total max per company permitted by current regulations. But the pundits seem to think that AT&T will get past those hurdles after some pain.

AT&T may face other issues. For example, a bill was recently introduced in the US House that would require cable companies to open up their infrastructures to competitive Internet service providers, as Canada has already done. This would destroy much of the economic advantage of owning the cable infrastructure. There are also one or two killer technical hurdles which must also be overcome to get reliable reasonable quality telephone service over thi cable TV infrastructure.

I have two additional issues. AT&T has been planning to only offer Internet service through its relationship with @Home. I do not know what that will mean to my, up to now, excellent MediaOne Internet service. I'm also considerably worried about the implications of the deal that AT&T has made with Microsoft to use Windows CE-based set top boxes in 2.5 million homes. I want to have uninterrupted IP access to the Internet from my own computers and I am far from sure that I can get that with the Microsoft 'the PC is the home controller' philosophy.

If AT&T manages to get past the regulators and remembers to actually offer Internet service (rather than some other service where they define the applications I can run) and telephone service this could be a very good deal for us all.

disclaimer: Harvard trains (in some areas) and disdains ( in other areas) regulators but the above are my musings.