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AT&T Rages at FCC Delay

The Federal Communications Commission (FCC) has once again been forced to postpone a vote on the $80 billion-plus merger of AT&T Inc. (NYSE: T) and BellSouth Corp. (NYSE: BLS) because the four voting commissioners couldn't agree on the regulatory conditions that should be imposed on the marriage.

The FCC was due to "consider a Memorandum Opinion and Order" concerning the merger at an open meeting that began at 9.30am in Washington this morning, but announced Thursday evening that the topic had been "deleted from the list of Agenda items scheduled for consideration."

This isn't the first time that the four commissioners have ducked out at the last minute, as the same thing happened earlier in October. (See FCC Balks at AT&T/BellSouth Merger Vote.)

The latest delay prompted AT&T, which has been making service strategy concessions in an effort to win FCC approval, to lash out at the "self interest of commercial entities and their litany of unreasonable demands" in a carefully-worded statement that reeked of frustration:

    In order to obtain expeditious FCC approval, we have put on the table a number of proposals that directly benefit consumers -- such as a $10 per month broadband offering and broadband connectivity to rural and low-income areas.

    These unprecedented conditions unrivaled by any other communications provider in a merger proceeding have been fully examined in an open, public debate, and have received glowing approval from a broad range of individuals and groups.

    State regulators, minority organizations, small business groups, local civic, educational and community groups and elected officials from both the Democratic and Republican parties have voiced their support for the merger and the pro-consumer conditions we have offered.

    While we regret that the merger has been delayed by the self interest of commercial entities and their litany of unreasonable demands, we look forward to the FCC’s approval, so that we can get about the business of providing the overwhelming benefits the merger represents to consumers, to the economy and to the public interest.
The delay is being caused by a standoff between, on the one side, commissioners Michael Copps and Jonathan Adelstein, who have concerns about the anti-competitive impact of the merger, and, on the other side, chairman Kevin Martin and commissioner Deborah Taylor Tate.

The fifth commissioner, Robert McDowell, has withdrawn from the vote on this issue because he was formerly a lobbyist for Incompas , the industry organization that represents the interests of competitive local exchange carriers (CLECs).

CompTel is dead against the merger. In a recent statement it backed the concerns of Copps and Adelstein, and stated:
    Competitive carriers have placed into the record substantial evidence demonstrating that the proposed merger would have material anti-competitive effects in both BellSouth’s and AT&T’s regions, with prices rising significantly both for wholesale customers and the retail customers who they serve...

    It is clear that the combination of AT&T and BellSouth will substantially reduce competition in virtually all telecommunications product markets in the AT&T and BellSouth regions and cannot be found to be in the public interest. Even AT&T and BellSouth implicitly acknowledge this fact by proffering their set of conditions.
If the current stalemate continues, the FCC's general counsel could rule that McDowell must be involved in the voting process, though the commissioner could then choose to abstain.

The merger of AT&T and BellSouth, first announced in March this year, would create a giant fixed and mobile carrier with about 300,000 staff and annual revenues of nearly $120 billion. (See Ma Bell Is Back!)

AT&T's share price is down $0.50, nearly 1.5 percent, to $33.52 today. BellSouth's stock has also slipped by 1.5 percent, down $0.68 to $43.97.

With the planned merger based on AT&T offering 1.325 of its shares for every BellSouth share, of which there are 1.82 billion outstanding, the merger is currently valued at $80.8 billion.

— Ray Le Maistre, International News Editor, Light Reading

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