AT&T has made an audacious bid to control the majority of the US' cable industry by making a $62 billion cash offer to acquire Media One.
The bid puts a huge question mark over Comcast?s proposed $60 million merger with Media One, announced last month.
The offer from AT&T, if it receives the nod from the US regulatory authorities, will give the fixed wire giant direct access to 26.5 million households, and a significant presence in 18 of the top 20 regional markets. It will enable AT&T to offer broadband IP services to homes allowing users to watch television, surf the Internet and chat on the telephone using the same cable pipe.
But the most important prize to AT&T will be direct access to millions of US homes that are currently served by local telcos.
The offer is a significant signal to the industry that AT&T is serious about local telephony and the only way it can do this, without getting into tangles with regulatory authorities, is via cable. It is already digesting its recent $48 billion purchase of another US cable giant, TCI, and has a strong partnership with Time Warner, one of the country?s top three cable operators.
Analysts believe Media One is attractive because of its high penetration of users using advanced broadband services such as cable modems. Said Lisa Pierce, analyst at Giga Information Group, "Media One has a wonderful infrastructure compared to TCI and Media One has customers using the type of technology AT&T wants to offer on the TCI network."
Pierce believes ownership of Media One would enable AT&T to accelerate its goals in cable and local telephony by between 12 and 24 months because of Media One?s experience. "It would get all this experience while building out its TCI plans and get its market message across," said Pierce.
Eventually AT&T wants to offer its cable customers bundled local and long distance telephony plus cable TV and bill these services on one invoice.
She does not believe that AT&T would face much regulatory opposition but foresees resentment from the Internet Service Provider (ISP) community. "If the deal goes through it would give AT&T exclusive ISP rights to most of the potential cable modem users in the US. The question is how much are competitors like PSInet and AOL going to scream?" asked Pierce.
AT&T said it is confident that it will complete the Media One acquisition by the end of the year.
Media One offers services in areas including Boston, Atlanta, Richmond and Los Angeles. AT&T said it would combine Media One?s Denver based headquarters with its broadband and Internet services business unit located nearby.
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