JUSTICE SAYS IT'S STILL REVIEWING PROPOSED AT&T COMCAST MERGER

Companies announced that waiting period for proposed merger under Hart-Scott-Rodino Act had expired at midnight Mon. without action by Justice Dept. “At this time, the HSR [Hart-Scott-Rodino] Act no longer prohibits the parties from closing the proposed transaction,” companies said, and that to extent Antitrust Div. had further questions, companies “expect to continue to cooperate.” Justice officials we spoke with were surprised companies had issued news release. “There’s nothing magical about Hart-Scott-Rodino,” one said. “The Department of Justice can keep an investigation open and can go back if it wants to.” In fact, Justice spokeswoman characterized proposed merger as subject of “an open investigation.” In any case, transaction still requires FCC approval, which companies acknowledged in their news release. FCC spokeswoman said merger proposal still was being evaluated and declined to comment further. Companies said they expected deal to close in 4th quarter.

Companies’ announcement came just days after they filed with FCC opposition to motions by coalition of consumer groups and Earthlink seeking Commission review of companies’ Internet carriage agreement with AOL Time Warner. Companies charged in their filing that “there is no credible basis” for requiring them to submit their service provider agreement with AOL and that, therefore, requests by Consumer Federation of America (CFA), Consumers Union, Center for Digital Democracy (CDD), Media Access Project (MAP) and separately, Earthlink, should be denied (CD Sept 10 p8). Companies said they “believe that a review of these confidential and competitively sensitive commercial documents is not necessary in order for the Commission to complete its public interest analysis of the merger.” FCC spokeswoman said FCC had neither asked for nor received copy of agreement.

AT&T and Comcast said in their filing, however, that after discussions with Commission staff, they would voluntarily file confidential copies of certain exhibits and other agreements related to restructuring of Time Warner Entertainment. TWE was partnership of AT&T and AOL that included cable assets that could put merger of AT&T Broadband and Comcast above regulatory ownership standard of 30% of populace. All 3 companies recently announced unraveling of that partnership. AT&T and Comcast then announced their own restructuring agreement proposing to set up separate trust overseen by govt.-approved person to operate TWE cable assets until they could be sold. Companies said they were willing to hand over some documents on trust proposal as long as they would fall under protective order already issued by FCC that protected confidentiality of sensitive documents. But they said AOL TW ISP agreement was “not relevant to the Commission’s review of the proposed merger.”

Consumer groups want review of ISP carriage agreement because they fear that merged company will have undue control over Internet access. Companies argued in their filing that, far from harming public interest, agreement would offer increased consumer choice in 10 million homes. They said they had several other ISP agreements already in place and had agreed to offer same terms to Microsoft’s ISP, Microsoft Network, as they had offered other ISPs. “The applicants have been and remain fully committed to offering customers a choice of ISPs, subject to negotiation of mutually beneficial terms,” companies wrote. They also rejected MAP’s assertion that terms of carriage deal for AOL were unprofitable. “That judgment is the responsibility of the management of AOL TW, not the Commission and certainly not MAP,” they said.

MAP Deputy Dir. Cheryl Leanza said Comcast and AT&T “didn’t address our points, or legal arguments or the precedent we cited.” She said MAP planned to file response by Fri. She declined to comment on Justice Dept. investigation except to say that MAP hoped officials would scrutinize merger carefully, especially with regard to ISP access. Meanwhile, Center for Digital Democracy, citing unconfirmed report, complained in its own news release that carriage agreement between AT&T Comcast and AOL included provision that would prohibit AOL from providing customers with any streaming media that might compete with AT&T Comcast video products. “Not only should the FCC demand to review the AT&T Comcast/AOL ISP agreement, but it should also launch an immediate investigation into the potential anticompetitive issues raised by the market power that the merging companies already appear to be wielding. So should the Federal Trade Commission, Department of Justice and Congress,” CDD said. Comcast spokesman declined to comment on CDD’s allegation, except to say that terms of AOL ISP carriage deal were confidential.

EchoStar, reacting to companies’ announcement, said its proposed acquisition of DirecTV “should be approved as it is the best chance the American consumer has in terms of receiving effective competition to the cable giants.”