Last week, AT&T Broadband CEO C. Michael Armstrong met with Microsoft executives in Redmond to discuss the potential deal, according to an August 13 Wall Street Journal story. The deal, valued at over $40 billion, is sure to raise eyebrows among Microsoft critics. If Microsoft acquires AT&T Broadband, fighting off other interested companies like Disney and enemy #1 AOL Time Warner, Microsoft could monopolize current and future Internet access.
The deal would bring Microsoft 16 million Internet, cable, and phone subscribers, making the company the largest broadband provider. Microsoft would have access to 28 million homes, providing not only Internet access, but music channels and cable TV as well.
Microsoft's interest in AT&T is hardly surprising. In the last few years, Microsoft has shown an interest in expanding into areas other than software. The company delved into cable TV with its Ultimate TV venture and into digital music with its Windows Media player.
The deal is also important to Microsoft because AOL, Microsoft's arch enemy, is rumored to be interested in buying AT&T, too. But Microsoft is a more promising buyer. It already has $5 million invested in AT&T and over $30 billion in cash reserves.
Obviously, Microsoft's enemies are keeping a close eye on the deal. "The leverage and power they would acquire is troubling," says Ed Black, president of the Computer & Communications Industry Association, a lobby group for AOL and Sun Microsystems. "With their blatant disregard for monopoly concerns, I'm not surprised that Microsoft is interested," says Black. "But now is probably not the right time for such a purchase." He's right. The likelihood of a deal happening anytime soon is doubtful. Microsoft is too busy putting out current monopoly fires to start new ones. Both AT&T and Microsoft refused to comment on the alleged deal. "We don't comment on rumor or speculation," says AT&T spokesperson John Heath.