Critics Consider AT&T Merger Conditions
Last Friday, the FCC cancelled its meeting on the megamerger because the four voting commissioners could not agree to what, if any, conditions the Commission should impose on the merged company. (See FCC Balks at AT&T/BellSouth Merger Vote.)
In an effort to win over Democratic commissioners Michael Copps and Jonathan Adelstein, AT&T is reiterating its claims that the deal -- worth an estimated $67 billion to $80 billion -- is in the public interest. In a six-page letter released last week, AT&T spelled out a detailed plan to promote accessibility to its broadband network, increase public safety, bring back outsourced jobs, and offer low-cost ADSL service, among other things.
The Commission will take comments on the proposals up until Oct. 24 and says it will make a decision on the merger no later than Nov. 3.
FCC Chairman Kevin Martin noted in a letter to his fellow commissioners: “Many of [your concerns] have previously been filed by other parties and have been commented on already.” But the question around Washington and throughout the telecom world is whether AT&T’s conditions go far enough or merely repeat what the phone company has already promised.
In a letter Sprint Corp. (NYSE: S) filed in early October at the FCC, the wireless company said, “the proposed merger will make a bad situation much worse.” Size matters, the company said, and approving the combo of AT&T and BellSouth would be "substantially increasing the merged firm’s incentive and ability to raise rivals’ costs.” The company was specifically referring to AT&T/Bellsouth controlling “the only transmission facilities serving the vast majority of commercial buildings" in their geographic areas.
Paul Jones, tw telecom inc. (Nasdaq: TWTC)’s senior VP and general counsel, said in a statement that absent regulatory safeguards, his business won’t be able to compete with AT&T after it absorbs Bellsouth. His company has about 6,400 commercial buildings connected via fiber network, he said, whereas AT&T/Bellsouth has “literally hundreds of thousands of commercial buildings.”
“We need regulatory checks on incumbent monopoly power to enable competition while protecting business customers from higher prices and degraded service quality,” Jones said in his prepared statement.
Clearwire LLC (Nasdaq: CLWR), the wireless broadband company, wants Bellsouth to give up its broadband spectrum in the 2.5GHz band as a concession to the merger. And, like smaller telecom players, cable companies offering voice service want the FCC to strengthen the interconnection rules to ensure that they can reach and serve current and former AT&T subscribers.
AT&T says it won’t compete unfairly by raising interconnection rates. And the carrier claims it will offer broadband access to every single one of its residential customers by 2007 -– an objective that sounds more like a business necessity than a charitable concession. It also said it would provide an ADSL modem for free “to residential subscribers in the Wireline Buildout Area” who upgrade from AT&T dialup service to its ADSL service.
“These are positive, pro-consumer provisions,” said Michael Balmoris, an AT&T spokesman.
But some observers say even some pondering and posturing by the FCC won't stop the merger from happening. A former FCC attorney says AT&T’s conditions “won’t croak the deal.” And, he added, it appears AT&T is willing to consider any “reasonable offer.”
And if the U.S. Department of Justice is any gauge, the deal will sail through the FCC unscathed. The DOJ approved the merger without putting even the mildest of conditions on the companies. (See AT&T-BellSouth Approved.) Interestingly, a year earlier, the DOJ put many more conditions on the much smaller SBC and AT&T merger. (See DOJ Clears SBC/AT&T Merger.)
— Eric Glick, special to Light Reading