AT&T will link two experimental interactive networks in Florida and California being tested by the cable operators Time Warner and Viacom, allowing the companies to deliver video-on-demand and voice communications, bypassing existing telephone exchanges.
AT&T's dollars 17.5bn purchase last week of McCaw Cellular gives it a similar method of bypassing traditional local telephone companies, which are owned by the seven 'Baby Bells'. An alliance involving AT&T and the cable companies would be in direct competition with the Baby Bells, which on Tuesday won a court victory giving them the right to distribute cable programming over their lines.
The ruling has alarmed the cable industry, which claims the Baby Bells have an unfair advantage in the race to provide multi- media services because of their captive market of local phone subscribers.
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