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The drubbing was partly a response to the complexity of the deal, which calls for AT&T to bundle its consumer operations and TCI's cable systems into a new subsidiary, called AT&T Consumer Services that John Zeglis, who now serves as AT&T president, will run as chairman and CEO. The unit will issue a separate "tracking stock" that will let investors place bets on the consumer-related businesses of the new AT&T. A similar tracking stock already exists for Liberty Media, TCI's cable-programming arm, whose holdings include the Discovery Channel and Black Entertainment Television. Malone, 57, who controls 86% of the Liberty stock, will continue to run that company after the merger but will leave TCI.
However Wall Street may have viewed the deal, some regulators saw it as a welcome spur to local competition--even as the Baby Bells howled. William E. Kennard, chairman of the FCC, says the merger looks "eminently thinkable." That hardly heartened US West and Bell Atlantic--which last year gobbled up neighboring NYNEX--which demanded access to long-distance markets should the deal go through. So far, Washington has barred the Bells from offering long-distance service to their own local customers on ground that they have not yet opened their "loops" to such rivals as AT&T. But to stick to that stricture after an AT&T-TCI marriage would be "like protecting the wolves from the sheep, and it's just absolutely wrong," says Jerry Brown, a spokesman for US West.
Especially when the wolf still seems hungry. For Armstrong and Malone, who is spending $1.8 billion to ready TCI cables for two-way voice and data traffic, the future is virtually here--and it looks astonishingly lucrative. Malone sees an imminent convergence of TV, telephone and computer services--long the grail of digital thinkers--that will allow customers to access all three separately or at once, simply by aiming and clicking a hand-held device at a TV set. Of course, this convergence has seemed "imminent" to Malone for the past half-decade, but new technology--most of it based on the Internet--seems likely to deliver, finally, on these rich promises. And Malone, among others, is imagining quite a future: "Would you like to order Viagra while watching your favorite entertainment show?" he quips.
If their deal is approved, Malone and Armstrong hope the merger will be a kind of business Viagra for AT&T's famously languid corporate culture. The two say their merged companies could start phasing in these hot new services swiftly. About 25% of TCI's systems will have the capacity to carry two-way traffic by the end of this year, with 95% scheduled to be ready by the end of 2000. At the same time, AT&T plans to spend some $400 per household to install the digital set-top boxes that will serve as portals to high-speed networks that will carry voice, video and data signals. So eager are the companies to get started that they plan to cross-market their cable and telephone services even as regulators review the merger--a strategy sure to bring little joy to households already swamped by come-ons.