Fool.com: AT&T Edges Toward Open Access (Breakfast News) December 6, 1999

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Monday, December 6, 1999

"To live effectively is to live with adequate information."
-- Norbert Wiener

AT&T Edges Toward Open Access

By Richard McCaffery (TMF Gibson)

Long distance telephone and telecommunications provider AT&T (NYSE: T) took a big step toward opening its cable lines and defusing a time bomb by reaching an agreement with MindSpring Enterprises (Nasdaq: MSPG) to eventually allow the Internet service provider use of its cable television lines for the delivery of high-speed Internet services.

The Washington Post broke the news about the agreement yesterday. The plan is being viewed as a first step for open access of cable lines for Internet services. The issue has been one of the most controversial in the industry since AT&T bought cable operator TeleCommunications Inc. and moved to buy MediaOne (NYSE: UMG).

AT&T is spending billions to obtain access to cable wires and customers, and billions more to upgrade the wires for Internet services, because it gives the giant company a rich new revenue stream and positions it to compete in one of the fastest growing industries in the communications market.

The problem, however, is that AT&T has an agreement that grants Excite@Home (Nasdaq: ATHM), a company in which AT&T owns a big stake, exclusive rights to provide ISP services over its cable lines. Since AT&T will become the country's largest cable provider once its purchase of MediaOne is complete, rivals like America Online (NYSE: AOL) and local regulators complained Ma Bell has too much control over the cable lines and that others must be allowed access.

AT&T is already fighting legal battles over the issue in local courtrooms.

The move, ultimately, will be good for investors in two ways. First, open access means more competition, better services, and lean, sharp companies fighting to provides those services. That's good for consumers and great for investors looking to find seasoned companies.

Second, AT&T shareholders don't have to watch the company fight a costly battle it probably can't win. It's better for AT&T to cut deals with ISPs on its own terms rather than waiting for the government to step in and tell them how to do it.

News to Go

As expected, food, coffee, and apparel manufacturer Sara Lee (NYSE: SLE) is buying the Hills Bros., MJB, and Chase & Sanborn coffee assets from Swiss food giant Nestle S.A. (OTC: NSRGY) to boost its share of the coffee market in North America. Terms of the deal weren't disclosed, but the units have annual sales of $280 million.

Title insurance, real estate, and financial services company Alleghany Corp. (NYSE: Y) is selling its Underwriters Re Group insurance business to Swiss Re America Holding for $725 million in cash. The sale doubles the size of Swiss Re's U.S. reinsurance business, and allows Alleghany to better focus resources.

Computer hardware, software, and services company IBM (NYSE: IBM) initiated a $100 million research effort to build a computer 500 times more powerful than the best available today to model the folding of human proteins, needed to better understand the nature of diseases.

Struggling drugstore chain Rite Aid (NYSE: RAD) named a new chairman, chief executive, and senior management team in the wake of problems related to mounting debt, restatement of earnings, and an SEC investigation. Robert Miller, former chief operating officer at Kroger (NYSE: KR), will become chairman and chief executive.

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