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Will cable TV deal aid consumers?

Comcast may not be able to lower prices

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AT&T cable subscribers, including thousands in Utah, would probably see a more efficient operation if Comcast Corp. succeeds in acquiring AT&T's cable operation, analysts said Monday. But those efficiencies might not translate into lower prices or enhanced programming.

The combination would create the nation's largest cable-television outfit, reaching about 22 million subscribers. The companies now have little geographic overlap. Comcast is strong in the mid-Atlantic region and especially in its home base, Philadelphia, while AT&T's cable operations are spread across the country, with a big presence in Denver, Dallas and Atlanta, among other cities.

Comcast is considered to be at the technological forefront of the cable industry and is expected to bring the other service in line if the deal is done. AT&T has been criticized for failing to bring the cable systems it acquired from companies like Media One and TCI up to the same level as competitors.

In an interview Monday, Comcast's president, Brian Roberts, emphasized his company's long history in the cable business and higher profit margins.

"Consumers will benefit from a golden age of new products we'll introduce, from video on demand to television commerce," said Roberts.

AT&T's long-suffering investors welcomed the offer, pushing the stock up nearly 12 percent, while Comcast's stock fell 7 percent on concerns about the price tag — $44.5 billion plus the assumption of $13.5 billion in debt.

Some analysts expect that a larger, more streamlined Comcast will have greater economies of scale, enabling it to purchase equipment and services at lower prices.

In theory, these price efficiencies could be passed to consumers. Consumers could also gain access to a wider variety of programming, albeit at Comcast's choosing, and find problems like billing discrepancies kept to a minimum.

But the real impact is anything but clear. As a giant, Comcast could wield considerable influence over the cable television industry on matters like operating software, set-top boxes and, especially, programming.

Comcast, which controls most of the rights to programming from Philadelphia's sports teams, has used political influence and legal arguments to keep competitors at arm's length there, according to Jeff Chester, who follows the cable industry at the Center for Digital Democracy in Washington.

When satellite broadcasters sought to enter the Philadelphia market, Comcast refused to provide them with broadcasting rights for local sports, citing a 1992 law that prohibits such programming from being transmitted by satellite, said Pantelis Michalopoulos, an antitrust lawyer who represented EchoStar, one of the satellite companies affected by Comcast's efforts.

"Comcast used a loophole in the law to limit the choices for consumers," Michalopoulos said. "If a behemoth controlling 30 percent of the cable market is created, the impact on consumers would be severe."

A person close to Comcast's dealings in Philadelphia said the company's commitment to wire every home, in poor as well as rich neighborhoods, helped to influence city officials in their decisions to limit competitors' access. And Comcast's dealings with satellite companies in Philadelphia are limited to that city, the person said, citing agreements to provide programming to satellite broadcasters in other cities.

It is unclear, though, how the creation of the nation's largest cable television company would affect the prices consumers pay for such service. Most markets are controlled by one provider.

The experience of other mergers provides some lessons. AOL's acquisition of Time Warner, creating the nation's second-largest cable company, was followed by price increases for Internet access, Chester of the Center for Digital Democracy pointed out. "As in other big deals, consumers will pay for the premium Comcast is offering to buy AT&T Broadband," Chester warned. "Who else will foot the bill?"