The Scoop...

In March 1999, AT&T Corp. acquired Tele-Communications, Inc. (TCI), and changed TCI's name to AT&T Broadband and Internet Services.

Cows for Cable

TCI had the most unlikely of beginnings: In 1956, ranch owner Bob Magness sold some of his cattle to finance the construction of his first cable TV system in the Texas Panhandle. Within five years, TCI had moved to Colorado to cover the Rocky Mountain region and had completed a successful initial public offering. Following a nearly 10-year spending spree, TCI had over 150 cable companies under its belt, including cable programmer Liberty Media, the largest of its separately traded units. With millions of cable subscribers and a microwave service second only to AT&T's, cable programmers appealed to the growing TCI by offering it low prices for its shows. TCI boasted 29 million cable customers and owned an interest in Black Entertainment Television, Discovery Channel, and American Movie Classics. In addition, TCI serviced Cablevision and PRIMESTAR, and had joint ventures with Comcast and Cox.

Courted by a telephone giant

Ever since the landmark Telecommunications Act of 1996 deregulated the industry, AT&T Corp. had been lusting for a way to get back into providing local telephone service. Colorado-based TCI and MediaOne may have satiated its desires. In March 1999 AT&T Corp. purchased TCI, but was subsequently criticized for overpaying. The merger allowed AT&T Corp. access to American homes via TCI's cable wires and programming assets. At the same time, TCI gained AT&T Corp.'s prestige while AT&T Corp.'s deep pockets allowed TCI to update its infrastructure. Such updates, however, were projected to be expensive and time-consuming. TCI became a subsidiary of AT&T and was renamed AT&T Broadband and Internet Access. In June 2000, AT&T became the largest cable provider by merging MediaOne into AT&T Broadband and Internet Services.

AT&T hopes that the purchases of TCI and MediaOne will allow it to transmit local and long-distance telephone service, high-speed Internet access, and cable television over a superefficient network based on TCI's and MediaOne's existing infrastructure. This vision, however, could be blocked by existing statutes that forbid AT&T to acquire certain broadcasting assets.

On-line offering

The TCI subsidiary that had the most appeal for AT&T may have been the online service @Home. @Home provided high-speed Internet service to home and business users via conventional cable lines, combining television and Internet and delivering it through the front door of more than 330,000 Americans. @Home's January 1999 acquisition of Excite, one of the most popular portal sites on the web, provided an additional reason for optimism. The acquisition added content and a strong brand name to AT&T Worldnet, the company's existing dial-up service.