McDowell May Vote on AT&T-BellSouth Merger

FCC Commissioner who once worked with CLECs may be asked to cast tie-breaking vote in the AT&T-BellSouth merger

December 5, 2006

4 Min Read
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 Justicesays 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

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like