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CC Docket# 98-141 - SBC/Ameritech Transfer
Before the Federal Communications Commission,
Washington, D.C.
DA 98-1492
CC Docket # 98-141
SBC/Ameritech Transfer
October 1, 1998
Thank you for this opportunity to comment on the proposed transfer of control of Ameritech to SBC. The comments that we wish to impart pertain to the effect that this transfer may have on Ameritech’s New Media division which is the umbrella for their cable television franchises.
The Cable Communications Agency of the City of Indianapolis is concerned about the anti-competitive aspects of this proposed transfer of control and the adverse affect it could have in allowing Ameritech New Media to continue to add to its cable franchise properties. Indianapolis is still awaiting effective competition from another cable provider. In those locations of the Midwest where Ameritech is providing cable TV service, consumer prices offered by the cable incumbents are significantly below those of communities where Ameritech is not competing. While there is no guarantee that Ameritech will overbuild the Indianapolis area, we are nevertheless concerned that the potential of an Ameritech overbuild could be removed from our community should the transfer of control be approved . Ameritech currently offers local telephone service in the Indianapolis/Marion County area.
While magazine articles may not always represent factual evidence, the trade publication coverage of the proposed transfer and the reporting of SBC’s history of its treatment toward video properties causes us concern, should the merger be approved. Consider if you will:
SBC’s CEO, Edward Whiteacre, testified before the U.S. Senate Antitrust Subcommittee that he "may pull back on Ameritech’s aggressive cable strategy" (Merger Sparks Skepticism, Antitrust Concerns, Cable World 5-25-98 at 12). "SBC showed no inclination toward an overbuild when it shuttered PacTel’s 8,000 subscriber overbuild operations in San Jose, Calif. Indeed, city officials in San Jose were caught completely off guard about the closure: Two days before the shutdown, PacTel executives were outlining the telcos’s overbuild strategy going out two years" (Several Cities Hoping Ameritech Will Stay In Video Business Cable World 5-25-98 at 77). "SBC also abandoned its own domestic cable operations, agreeing last fall to sell systems in the Washington, D.C., area to a group including Prime, and shuttering its cable system in Richardson, Texas. Furthering the perception of a pullback from wired cable was, in March, SBC’s announcement of resale agreements with direct-broadcast satellite providers DirecTv Inc. and U.S. Satellite Broadcasting" (Ops Await SBC/Ameritech Fallout, Multichannel News 5-18-98 at 1 & 61).
Telecommunications analyst Philip Sirlin of Schroder & Co. notes "What SBC/Ameritech (the ownership transfer) does, if you view it the way I do, is create a monopoly so big to change the rules so that competition does not occur. Bottom line: That’s not good for the cable industry", (SBC Reorders Telco Universe/Ops hope Ameritech will Shelve video expansion, Cable World 5-18-98 page 1).
Warren’s Cable Monitor (5-18-98 page 7) noted that "Ameritech cancelled a teleconference touting its success with cable overbuilds, scheduled for May 13, following the announcement of takeover by SBC. Cancellation spurred speculation as to impact of takeover on Ameritech (cable) overbuilds, particularly since SBC has pulled out of most cable ventures. SBC sold its interest in cable systems in Montgomery County, Md., and Arlington, Va., and scaled back Pacific Telesis’s wireless cable operations after that takeover. Ameritech is by far the largest cable overbuilder, with more than 70 Midwestern cable franchises."
Senate Commerce Committee chairman John McCain lamented the apparent results of the 1996 Telecommunications Act. Since then, he said, "we have seen the consolidations within the industries; we have seen mergers, rather than competition; and we have seen increased rates, whether they be in cable, or local, or long distance, indicating again that the Telecommunications Act of 1996, whether intended so or not, protected industries and protected everybody but the consumer" (Ops Await SBC/Ameritech Fallout Multichannel News 6-1-98 at 61). Cable World reports that "there are a lot of cities that have now glimpsed the promised land of competition," said University of Wisconsin professor and city consultant Barry Orton. ‘But, like Moses, they’ll never get a chance to see it’ if SBC shuts down Ameritech’s cable division". ‘My gut tells me that SBC will get out of the cable business’." (Cities Hoping Ameritech Will Stay In Video Cable World 5-25-98 at 8). Mike Roth, City Attorney to Naperville, Ill., notes, "We’re happy with Ameritech’s cable service here and we would be disappointed if we didn’t have competition" (Cities Hoping Ameritech Will Stay In Video Cable World 5-25-98 at 8).
On the flip side of this issue, MultiChannel News reports that the "consensus is that despite its apparent disdain for cable, SBC needs Ameritech New Media (ANM/cable division) in order to produce a bundled package of cable, Internet access and local and long distance telephone services that will be comparable to what AT&T will be offering as a result of the marriage with TCI." (Will AT&T Deal Save Americast? Multichannel News 7-27-98 at 43). According to Mark Plakias, managing director of Strategic Telemedia, "SBC should be looking at Ameritech New Media as a convergence opportunity, and not a cable opportunity. It’s got the scale now to justify a major investment in a bundled-value proposition. Getting rid of ANM would seem to take away from that" (Will AT&T Deal Save Americast? Multichannel News 7-27-98 at 43). However, the article goes on to say that "some cable analysts rated the company’s (ANM) chances of survival as dim, at best, arguing that the notoriously bottom-line-oriented SBC will not invest capital in pursuing an overbuild strategy".
Ameritech New Media’s success in providing competition to incumbent cable operators has been well chronicled. Cable World reports that "cable companies are dropping rates when Ameritech comes to town, the telco said, claiming that Time Warner has dropped basic rates $2, Jones Intercable $4 and TCI and Continental $5 in competitive markets" (Ameritech to FCC: Please Settle Squabbles More Quickly, Cable World 5-19-97 at 46). "In other locations, prices have actually been rolled back. One such community is Troy, Michigan, where TCI shaved $4.07 per month, or 15%, off the cost of expanded basic last year, while shifting Disney Channel to that tier. The two moves produced a savings of up to $14.52 per moth for TCI customers" (Ameritech’s Detroit -Area Push May Slow Rate Hikes, Multichannel News 12-1-97 at 46).
Multichannel News reported "that no matter how many customers Ameritech has, its presence in the market has definitely had a financial impact on the incumbent cable companies. Time Warner and Coaxial have not raised rates in over a year" (Collision In Columbus, Multichannel News 6-29-98 at 8A).
In summary, with Ameritech New Media’s success in providing competition and consumer choice in the communities in which they have overbuilt, we ask that the FCC carefully weigh the criteria before them as they examine the proposed transfer of control. At issue are the current and potential benefits that the consumer receives via cable TV competition provided by ANM and whether the proposed transfer of control will continue and increase those consumer benefits in SBC and Ameritech’s "home" areas.
Respectfully submitted,
Rick Maultra Director
Cable Communications Agency
City of Indianapolis G19 CCB
200 E. Washington Street
Indianapolis, IN 46204
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