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McDowell May Vote on AT&T-BellSouth Merger

It's beginning to look a lot like Christmas for AT&T Inc. (NYSE: T), as Washington sources say the FCC may approve the telco's merger with BellSouth Corp. (NYSE: BLS) with fewer concessions than even the carrier itself expected. (See Critics Consider AT&T Merger Conditions.)

This new turn centers on a decision by Republican Federal Communications Commission (FCC) Commissioner Robert McDowell on whether to take part in the merger vote, breaking the 2-2 tie that stands today among his fellow Commissioners. McDowell earlier removed himself from the vote because of his recent association with the CLEC industry group, Incompas , which opposes the merger.

FCC Chairman Kevin Martin sent a letter to Capitol Hill December 1 saying he’s asked the FCC's general counsel to determine whether it’s possible for McDowell to participate in the vote after all. A source familiar with the FCC's thinking says the general counsel will indeed clear McDowell to do so. This will leave it entirely up to McDowell himself. (See FCC Balks at AT&T/BellSouth Merger Vote.)

And the pressure is growing by the hour for McDowell to take part. "You've got AT&T, you've got letters from the Hill, you've got the Chairman, and on the other side you've got the guy's integrity," says Art Brodsky of the DC-based special interest group, Public Knowledge. Public Knowledge opposes McDowell's participation in the vote.

Brodsky says McDowell has a big decision to make -- and soon. The FCC meets again December 20. "The guy has got SEC regulations to think about, he's got the Virginia state bar to deal with, but on the other hand he is a Bush guy -- he was part of the Bush legal defense team in Florida in 2000." (See FCC's McDowell: I'm No Dropout.)

AT&T spokesman Mike Balmoris says AT&T's people haven't sought to communicate directly with McDowell to influence his decision.

McDowell has remained silent for many weeks, but finally addressed the matter publicly Tuesday. In a speech in New York, McDowell said it wouldn’t take him long to get up to speed on the merger proceeding, if he indeed is asked to take part in the vote. He also said he believes last year's mergers of the old AT&T and SBC, and of MCI and Verizon Communications Inc. (NYSE: VZ) provide good templates to follow in the current approval proceedings.

So what's really at stake in all this?

A source close to the FCC tells Light Reading that if Commissioner McDowell takes part in the upcoming vote –- and right now it's looking more and more as if he will -- AT&T will have to give up fewer material concessions than it had anticipated in order to get the deal done.

AT&T spelled out what it was willing to do in a six-page letter to the FCC October 13. The letter outlines 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. (See Whitacre, Martin Line Up on Neutrality.)

Since that letter was written, AT&T lobbyists have discussed ways of expanding its concessions to appease opponents of the merger, especially the CLECs. For instance AT&T might also offer to lease or sell fiber optic lines in office buildings where AT&T and BellSouth data services are the only ones available. (See GAO Cites Deregulation Doubts.) The Department of Justice says those buildings number only 25 or so. (See DOJ Clears SBC/AT&T Merger.)

But no wholly new types of concessions have been introduced in those discussions, AT&T's Mike Balmoris says. (See AT&T Rages at FCC Delay.)

He also declined comment on the idea that AT&T might get off easy if McDowell votes, saying AT&T could not comment on speculation. Balmoris provided the following prepared statement:

"We’ve been at this for a long time. The draft order was originally circulated in September, and the FCC has had to postpone three open meetings because an agreement could not be reached. It’s unfortunate, but after months of intense effort on our part, we remain at an impasse. We continue to work towards approval of the deal by the end of the year."

Some deal opponents have called on AT&T to make some strong network neutrality promises as it subsumes the BellSouth network. But sources say this is unlikely to happen, especially if McDowell ends up voting. In its October 13 letter, AT&T pledges to adhere to the FCC's own list of net neutrality dos and don'ts, a document many believe carries little real legal weight. (See AT&T's Whitacre: 'Nobody Gets a Free Ride'.)

A Verizon spokesperson in Washington said his company is staying quiet on the McDowell affair.

— Mark Sullivan, Reporter, Light Reading

Mark Sullivan 12/5/2012 | 3:33:10 AM
re: McDowell May Vote on AT&T-BellSouth Merger After the merger is passed, can AT&T be more agressive about establishing "peering agreements" with Internet companies that are willing to pay for a fast lane in the access network?
palaeozoic 12/5/2012 | 3:33:08 AM
re: McDowell May Vote on AT&T-BellSouth Merger I would certainly hope so. Consumers want it (faster downloads). Content providers want it (deliver better service to their customers). Service providers want it (additional revenue streams in a dog-eat-dog world). Investors want it (healthy service providers, greater CAPEX).

Who doesn't want it?

Oh yea, Google. But I guess if I had spent billions of dollars building my own transport and caching infrastructure I wouldn't want my competitors to be able to trump me for a few pennies per download. So IG«÷d enlist Washington to defend my turf but do it under the guise of G«£itG«÷s our netG«• or (this oneG«÷s even better) G«£save the internet.G«•

materialgirl 12/5/2012 | 3:33:01 AM
re: McDowell May Vote on AT&T-BellSouth Merger What I want is free speech, for which I am willing to pay a pipe provider a "fair return." I do not want a bunch of me-too "services bundles" shoved down my throat for a high (and even-increasing) monthly fee. Nor do I want a walled garden, of the sort already offered in many cellular networks. Service providers can feel free to offer pricey bundles, but only if I have a real alternative choice.
Gabriel Brown 12/5/2012 | 3:33:00 AM
re: McDowell May Vote on AT&T-BellSouth Merger Cellular walled gardens have failed here in the UK, and thereG«÷s not one provider left following this tactic.

Data access charges are high, however.
Duh! 12/5/2012 | 3:32:58 AM
re: McDowell May Vote on AT&T-BellSouth Merger What exactly do you mean by "fast lane in the access network"? What is its measurable effect? What is its measurable effect on traffic in the "slow lane" and at what point will it matter? What is the nature of these "peering agreements" you envision? Are they inclusive or exclusive? How are they created? Who is eligible to get one?

Be specific.

Or is this pointless speculation, just like the pointless speculation that gave rise to all the network neutrality legislation which is about to mercifully die in a few days.

Michael Harris 12/5/2012 | 3:32:54 AM
re: McDowell May Vote on AT&T-BellSouth Merger Who doesn't want it? Oh yea, Google. But I guess if I had spent billions of dollars building my own transport and caching infrastructure I wouldn't want my competitors to be able to trump me for a few pennies per download.

Seriously, perhaps Google should take the first step toward "net neutrality" by pledging never to implement QoS on its own backbone. It could be used to do things like [gasp!] prioritize latency-sensitive video and audio apps to improve consumers' online experience. That would certainly fall against Goog's "do no evil" credo.

paolo.franzoi 12/5/2012 | 3:32:53 AM
re: McDowell May Vote on AT&T-BellSouth Merger
How about they promise net neutrality by agreeing never to filter any content to anyone - as they did for China.

Hard for me to get on their bandwagon when they have their own issues.

Duh! 12/5/2012 | 3:32:51 AM
re: McDowell May Vote on AT&T-BellSouth Merger There's this old aphorism in Washington. It goes something like "Don't tax you, don't tax me, let's tax that fellow behind the tree". Substitute "regulate" for "tax" here, and remember that Telcos and MSOs make great punching bags. That, and Google's Astroturf is better than the Telcos'.

I just hope that Bill Kennard, who gets it a bit better than the rest of his fellow Dems (and quite a few Republicans), manages to talk some sense into them before they create some major breakage on behalf of GOOG and MSFT.
Michael Harris 12/5/2012 | 3:32:47 AM
re: McDowell May Vote on AT&T-BellSouth Merger The challenge is that on the surface NN seems like a flag waiving free speech issue. Some day it could be. If so, regulate it then. Now it's just Google-spin.
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