DEAL LINKS CABLE TV, PHONE, NET SERVICES.

Byline: Bruce Meyerson Associated Press 

AT&T Corp. joined with Time Warner Inc. on Monday in its drive to use cable TV wires to provide one-stop shopping for television, telephone and Internet service.

Pledging savings of at least 20 percent over competitors, the companies struck a deal to offer local and long-distance calling, TV programming and high-speed Internet access via Time Warner's cable systems in 33 states.

Combined with earlier moves - notably AT&T's purchase of cable TV company Tele-Communications Inc. - Monday's deal will allow AT&T to offer these services to 42.7 million homes within five years, the companies said. That's about 42 percent of U.S. households.

The deal follows a series of smaller alliances with cable companies announced last month by AT&T and marks the most pivotal step in its return to local phone service since last year's agreement to buy TCI.

AT&T left the local calling business in 1984 when it was broken up by the government.

AT&T said it is talking with other cable companies about deals, but declined to elaborate. The company hopes to increase its potential customer base to 60 percent of the nation's homes by late spring, said TCI President Leo Hindery Jr., who will head all of AT&T's cable service operations.

At least 25 percent of those households are expected to sign up within six years, he added.

The companies wouldn't give specifics about what they plan to charge for the new services, except to say the savings would be considerable.

For Time Warner, a joint venture with AT&T adds a credible partner in a battle to win customers away from deeply entrenched local phone monopolies.

AT&T and Time Warner said they will test the television and telephone services in one or two cities by the end of 1999 and expand the venture next year. AT&T already has begun a pilot program through a TCI cable system in Fremont, Calif., and plans to begin 10 others with TCI later this year.

The pilot programs will be used to determine which combinations of services - including AT&T's and Time Warner's competing Internet access businesses - are most popular, said Time Warner Chairman and chief executive Gerald M. Levin.

``The principle of this joint venture is to find out in the marketplace what type of packaging makes sense,'' said Levin.

While AT&T's foray into cable telephone services has been the most ambitious in the industry, it will face some major competitors in the rapid convergence of voice, data and video technologies.

Big cable companies such as Cox Communications also are starting to offer local phone service over their cable lines.

AT&T will own slightly more than three-quarters of the joint venture and Time Warner the rest. AT&T estimates it will spend $600 million on the venture in the first two years. In addition, it will spend between $300 and $500 to equip each home to handle telephone services over cable lines.

The companies expect the arrangement to generate annual sales of $4 billion after three years.