Copyright 2001 The Chronicle Publishing Co.  
The San Francisco Chronicle
JULY 10, 2001, TUESDAY, FINAL EDITION
SECTION: BUSINESS; Pg. B1

LENGTH: 663 words

HEADLINE: Comcast makes bid for AT&T Broadband;

Comcast bid awes experts;

Billions offered for AT&T Broadband

SOURCE: Chronicle Staff Writer

BYLINE: Vanessa Hua

BODY:
Comcast's proposed acquisition of AT&T Broadband could mean more cable channels and services for Bay Area customers -- but at the risk of less competition nationwide and higher prices, industry watchers and consumer advocates said.

The hostile bid by Comcast, revealed Sunday, would create a cable TV and high-speed Internet access behemoth dwarfing all others.

Comcast, the country's third-largest cable TV provider, is offering to buy AT&T Broadband with 1.05 billion shares of its stock, an offer worth $41 billion based on yesterday's closing stock price. The Philadelphia company also would assume $13.5 billion in AT&T debt.

AT&T said in a statement yesterday that it has no plans to sell AT&T Broadband, but will evaluate the Comcast proposal "and do what is in the best long-term interests of our share owners."

Comcast's proposal would boost its number of subscribers to 22 million from 8 million, or one-third of the U.S. cable market -- with 2 million of those in the Bay Area.

Comcast has been an industry leader in offering advanced services such as speedy Internet connections over cable modems and digital cable, analysts said.

"In terms of the types of services they provide, they're at the top," said Anna-Marie Kovacs, analyst at Janney Montgomery Scott in Boston.

By contrast, AT&T's record has been uneven, due to its patchwork nationwide network in varying stages of development -- some ready for advanced services, others antiquated and requiring major upgrades.

The large potential market share would give Comcast more clout in negotiating -- which could mean more cable programs and other services for consumers. The company, owner of the QVC and E! cable channels, could also use the network to start its own programs.

A look at other areas where Comcast entered the market through acquisitions could provide some clues to consumers.

In May, Comcast told Baltimore customers there would be no changes in the station lineup or bills after the purchase of the city's cable system from AT&T. However, customers in Baltimore's surrounding counties saw rates rise from 3.3 percent to 5.5 percent because of planned fiber-optic upgrades and an increase in programming.

However, prices vary from locale to locale, depending on the deal brokered with local franchise authorities and the extent of the improvements needed.

In Montgomery County, near Washington, D.C., customers continued to complain about service quality after Comcast bought the system from Prime Communications, which had a reputation for bad customer service and had problems upgrading.

Acquiring AT&T Broadband's 14 million subscribers would be Comcast's biggest challenge yet.

"It's a formidable hurdle, even for someone with as much experience as Comcast," said Jim Doyle, managing director at investment bank First Union Securities. "There are a lot of moving parts."

Consumer advocates questioned the choice and diversity of programming, and availability of cable Internet service, should Comcast complete the deal.

"It would increase concentration in an already concentrated industry," said Ken McEldowney, executive director of Consumer Action in San Francisco. "It would decrease choice and raise prices."

McEldowney also questioned what would happen to "open access." In 1999, the Board of Supervisors granted AT&T the San Francisco cable franchise without a requirement to open the system to rival online services.

Comcast officials said the company was testing open access in Greater Philadelphia and would need to evaluate the Bay Area's system before it would consider opening up the network.

As for cable telephone service, Comcast said it is waiting for the technology to improve before the company would offer it on a large scale.

In the Bay Area, AT&T offers cable telephone service in Fremont and a handful of other cities.

The Associated Press contributed to this report. / E-mail Vanessa Hua at vahua@sfchronicle.com.

LOAD-DATE: July 10, 2001