FCC Delays AT&T/BellSouth Vote To Air Approval 'Concessions'

Telecom Policy Report, Oct 16, 2006

In a seldom-seen move to reach consensus, the Federal Communications Commission (FCC) on Friday opened up for public scrutiny a series of conditions and apparent broadband-deployment, goal-oriented concessions AT&T and BellSouth are prepared to support in exchange for the last official green light on their proposed $67.1 billion merger.

The sudden development - coming after a week of fits and starts that saw a tacit U.S. Department of Justice (DoJ) unconditional nod and the FCC twice put off its consideration and voting on the colossal deal at least until Nov. 3 (TelecomWeb news break, Oct. 13) - includes several AT&T/BellSouth sweeteners and freebies on digital subscriber line (DSL) offerings thrown into a compromise approval plan designed to make the transaction more palatable to regulatory, political, consumer and industry critics.

Having already completed a formal public comment process on original AT&T/BellSouth asset/license transfer control applications dating back about six months, the FCC took the rare step of reopening its debate on the matter in a notice giving 10 days - until Oct. 24 - for additional debate and discussion. Observers say the last time a hot consolidation issue produced such a repeat review on merger conditions was the controversial Bell Atlantic-GTE combination (later to become Verizon Communications) that eventually was approved in June of 2000.

Another uncommon element of this past week's FCC developments in the pending AT&T/BellSouth deal involved authorized disclosures of internal memos between Democratic commissioners Michael J. Copps and Jonathan S. Adelstein and FCC Chairman Kevin J. Martin, a Republican, on their concerns. This surfaced amid heavy behind-the-scenes lobbying for approval by the two former Bell companies as well as interdiction by merger opponents.

Copps and Adelstein are highly critical of the DoJ, and they essentially are pushing for even more AT&T/BellSouth restrictions and requesting more concessions than they had done in last year's SBC Communications/AT&T and Verizon/MCI "mega-mergers." In conceding more time for evaluation, Martin and fellow GOP Commissioner Deborah Taylor Tate are seeking a 4-0 accommodation without voting-edge Commissioner Robert M. McDowell, the newcomer Republican who ostensibly can't participate because of his previous lobbying/legal work for competitive carriers.

Proposals Detailed In Notice

The FCC's new notice (Docket No. 06-74) is based on a supplemental filing with concession and compromise proposals submitted by AT&T and BellSouth. The companies reportedly not only are in a hurry to get the FCC's blessing for the sake of speed itself, but they also are said to be worried about November's general-election outcomes in the U.S. Senate and House of Representatives that could change the political attitude toward the current reassembling of Ma Bell.

In response to questions and objections, AT&T and BellSouth told the FCC they are making formal offers in order to get a speedy unanimous approval of the transaction, despite the existing DoJ consent. They indicated virtually all conditions/commitments proposed would apply in the AT&T/BellSouth in-region territory, including the following:

>>By Dec. 31, 2007, broadband Internet access service (speeds in excess of 200 Kb/s in at least one direction) will be offered to 100 percent of the residential living units in their territory. This involves at least 85 percent addressed by wireline technologies and the rest via various wireless means (including but not limited to satellite and WiMAX fixed wireless) as well as incremental deployment timetables for rural areas and low-income dwellings.

>>During calendar year 2007, an asynchronous DSL modem without charge (except for shipping and handling) will be provided to residential subscribers within its so-called wireline buildout area who replace AT&T/BellSouth dial-up Internet access service with AT&T/BellSouth ADSL service and elect a term plan of twelve months or greater.

>>Special $10/month deals will be offered to retail consumers in the wireline buildout area who have not previously subscribed to AT&T's or BellSouth's ADSL broadband Internet service. This offer will include speeds as fast as 768 Kbp/s, and the monthly rate excludes any applicable taxes and regulatory fees.

>>Within 12 months of closing, so-called "naked DSL" will be offered to ADSL-capable customers (without requiring they also purchase circuit-switched, voice-grade telephone service). This will continue in each state for 30 months after the policy is implemented. "In all events, this commitment will terminate no later than 42 months after the merger closing date," the companies added.

>>Internet service providers (ISPs) will be offered ADSL transmission for their provision of broadband Internet service to ADSL-capable retail customer premises that is functionally the same as the service AT&T offered within its in-region territory. In addition, the "wholesale offering will be at prices comparable to those available in the overall market for wholesale broadband services."