Justice Department clears 2 telecom mergers

Deseret News (Salt Lake City), Oct 28, 2005 by Jennifer C. Kerr Associated Press

WASHINGTON -- The nation's two biggest local phone companies received approval Thursday from antitrust regulators to buy the two largest long-distance carriers in multibillion-dollar mergers that would change the landscape of the telecommunications industry.

The Justice Department cleared the mergers of SBC Communications Inc. with AT&T and of Verizon Communications Inc. with MCI Inc. without any significant conditions, such as the asset sales that critics said were needed to ensure adequate competition.

The Federal Communications Commission still must sign off on the mergers, and that could come as early as today when the agency meets for its monthly public meeting.

FCC Chairman Kevin Martin supports the mergers, but it's not clear if the two Democratic commissioners on the panel will go along. Because the commission is split between two Republicans and two Democrats, Martin would need the support of at least one Democrat for approval.

The SBC merger, valued at $16 billion, won't be the end of the AT&T name. SBC, based in San Antonio, plans to change its corporate name to the iconic AT&T, company officials said.

New York-based Verizon will keep its corporate name after the $8.5 billion merger with MCI.

Justice Department approval requires Verizon and SBC to lease to smaller competitors several hundred unused or "dark" lines that run to buildings serving mostly business customers. The leasing is required in 19 metropolitan areas where the companies, either SBC or Verizon, would be the only providers.

Without the condition, the mergers would have resulted in higher prices for certain customers in eight metropolitan areas in Verizon's territory and 11 metropolitan regions in SBC's area, the department said.

AT&T and MCI dominate the market for business customers, and the mergers would enhance the base of business customers for Verizon and SBC. The deals would also expand their national and international presence.

Gene Kimmelman, senior policy director at Consumers Union, said the Justice Department decision will cut competition, leading to fewer choices for consumers and higher prices.

"This is an earth-shattering reversal of competition policy from the agency that 21 years ago broke up the Bell monopoly and today is coddling the dominant Bell companies who seek to re-monopolize each of their regions," Kimmelman said.

Not so, says Verizon senior vice president and deputy general counsel John Thorne. The eight-month review by antitrust staff proves "that the transaction is pro-competitive and will not lessen competition in any market," Thorne said.

SBC senior executive vice president and general counsel James D. Ellis called it a "fair and impartial determination that . . . the merger of SBC and AT&T will not harm competition."

Verizon and SBC are still awaiting approval from several states. SBC expects its merger to close by the end of the year; Verizon expects to close by late this year or early next year.

Under the Justice Department agreement, the merged companies would have to lease their connections to more than 350 buildings in which they own or control wireline access.

For Verizon and MCI, the metropolitan areas are: Washington, D.C., and Baltimore, considered one area, Boston, New York, Philadelphia, Tampa, Fla., Richmond, Va., Providence, R.I., and Portland, Maine, the government said.

For SBC and AT&T, the metropolitan areas are: Chicago, the Dallas- Fort Worth area, Detroit, the Hartford and New Haven, Conn., area, Indianapolis, Ind., Kansas City, Los Angeles, Milwaukee, Wis., San Diego, the San Francisco and San Jose area, and St. Louis.