COLLAPSE OF A MEGA-MERGER : Don’t Blame Us : Administration Says Information Highway Still on Track

Clinton Administration officials Thursday lashed out at claims that their regulatory policies contributed to the unraveling of the Tele-Communications Inc./Bell Atlantic Corp. merger, saying they remain committed to helping industry build a national information superhighway.

“The lack of two companies merging--granted, very large companies--should not have a significant effect on the development of an information highway,” Commerce Secretary Ronald H. Brown said.

Some industry analysts had speculated that the decision to cancel the $33-billion merger agreement between the nation’s largest cable company and the huge Philadelphia-based telephone concern might have been a gamble by the companies to embarrass the Administration into granting regulatory concessions to the beleaguered cable industry, which earlier this week was ordered by the government to roll back cable fees for the second time in a year.

But the head of the federal agency that oversees the industry said there will be no backtracking on cable regulation.

“Whether or not they can agree on price is not our concern; we are concerned with the public interest . . . and keeping cable prices at reasonable levels,” said Reed E. Hundt, chairman of the Federal Communications Commission.

Meanwhile, Sen. Howard M. Metzenbaum (D-Ohio), a critic of the proposed merger who had threatened to introduce legislation to block it, said the deal’s failure might even benefit cable TV and telephone company customers.

“Forget what Bell Atlantic and TCI try to tell you; the collapse of their deal is great news for consumers,” he said. “The end of their merger is . . . the beginning of a superhighway we can all afford to ride.”

The merger’s collapse will intensify debate over what role the federal government should play in overseeing an industry that the Administration has been encouraging to risk billions of dollars to build the so-called information superhighway. The Administration envisions a new technological infrastructure that would link individual Americans with schools, government and industry.

Vice President Al Gore, among other Administration officials, has said that a national information superhighway would help create thousands of jobs and boost American competitiveness. He also said such a network would improve education, medical knowledge and scientific research by giving doctors, teachers, students and others in even the remotest and poorest communities of the nation electronic access to current data.

In recent months, TCI President John C. Malone and Bell Atlantic Chairman Raymond W. Smith told Capitol Hill lawmakers and Wall Street investors that they were willing to spend billions to build such a network. But they said they needed their combined financial resources to provide new telecommunications services.

Many cable operators said Thursday that the failed merger was the starkest evidence yet that the Clinton Administration is not interested in backing up rhetoric about the information superhighway with political and regulatory support for industry.

“These two companies were among the most aggressive in espousing the wonders of the new communications superhighway and, to the extent the deal has fallen, I think you” have to blame government regulation, said Amos B. Hostetter, chairman of Boston-based Continental Cablevision, which has 2.8 million subscribers.

“To have an FCC chairman say that this will have no effect on investment spending” on the information highway “is shocking and naive,” Hostetter said. “This is going to give the financial community real pause.”

Despite the criticism, backers of at least one other big cable-telephone marriage--Atlanta-based Cox Enterprises Inc. and Southwestern Bell Corp.--said they will proceed with their plans to complete a $4.9-billion telecommunications joint venture similar to the TCI/Bell Atlantic deal. They said the financial benefits of the proposal outweigh any regulatory restrictions on cable revenue.

Enticed by predictions that Americans are prepared to spend tens of billions of dollars a year to watch movies, tap into databanks and video games and keep in touch by mobile phone, the telecommunications industry has been rushing to develop ground-breaking new technologies such as high-definition television, digital radio, satellite and wireless communications services.

The cellular phone industry, for example, is adding more than 1,000 customers a day. And Hughes Aircraft Co. and Hubbard Broadcasting have invested nearly $1 billion in a satellite venture that, starting this spring, will allow American households to sign up to receive as many as 150 cable channels.

Some Administration officials privately expressed relief Thursday that the collapse of merger talks means they will not have to decide the fate of a complex marriage that, if approved, would have given two telecommunications behemoths access to nearly a quarter of American households.

Still, most experts say the financial rewards of the information superhighway remain too enticing to deter most entrepreneurs.

“The future of the information superhighway still looks bright because you now will have robust competition among three competitors”--cable, telephone and wireless communications companies, said Anthony M. Rutkowski, former director of technology for Sprint Corp. who now serves as executive director of the Internet Society.