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FCC Approves SBC-AT&T, Verizon-MCI Unions Oct. 31, 2005

Posted by iNext - 2005-11-02

Federal regulators approved SBC Communications' takeover of AT&T and Verizon Communications' purchase of MCI Monday in a move consumer activists called anticompetitive.

By 4-0 votes, the Federal Communications Commission approved a compromise adding several conditions - but also removing the last regulatory barriers - to the multibillion-dollar mergers.

The agency required that SBC and Verizon freeze the wholesale prices they charge competitors to lease high-capacity business lines and said they had to guarantee that they will sell their Internet access as a stand-alone service, so customers aren't forced to buy local phone service as well.

Most state regulatory agencies already have sanctioned the unions, although several more still are needed. The acquisition by SBC Communications Inc. of AT&T Corp. is valued at $16 billion; the deal with Verizon Communications Inc. and MCI Inc. is said to be worth about $8.5 billion.

FCC Chairman Kevin Martin had wanted the mergers approved without conditions. The two Democrats on the four-member panel balked at that, believing it would hurt competition. Martin postponed a vote scheduled for Friday and continued negotiations during the weekend to work out a deal.

"I believe that the affected markets would remain vibrantly competitive absent these conditions," he said. "Nevertheless, the parties involved have chosen to make these commitments now in order to obtain the certainty of immediate commission approval."

Critics of the deals had complained that asset sales in overlapping areas were needed to ensure healthy competition in the industry, but federal regulators declined to approve selloffs for either company. Democratic commissioner Michael Copps acknowledged he would have liked to require more.

"Am I entirely satisfied? No," he said. "But this order is now conditioned on provisions designed to address numerous possible harms to competition and to consumers, as well as to protect the openness and innovation that must always characterize the Internet."

The Justice Department cleared the mergers last week, with more limited conditions than those placed on the companies by the FCC. Its approval was contingent on Verizon and SBC leasing to rivals high-capacity lines serving business customers in 19 metropolitan areas, including Washington, Boston, New York, Chicago, Detroit, Los Angeles and St. Louis.

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

Consumer advocates and Bell rivals have complained that the competition for the Bells that AT&T and MCI would have provided in many markets would be virtually eliminated by the mergers - meaning limited choices for consumers and higher prices.

"Approval of these mergers undermines more than 20 years of efforts to introduce competition into the residential local and long distance telecommunications market," said Gene Kimmelman, senior director of public policy for Consumers Union, which publishes Consumer Reports magazine.

"The FCC promises cross-technology competition with Internet phone service on cable and telephone systems, but the commission has failed to ensure that consumers will receive meaningful choices at fair prices," he said.

SBC expects its merger to close by the end of the year; Verizon expects to close by late this year, or early next year.

After SBC completes its merger, the San Antonio based company plans to change its corporate name to the more recognizable AT&T.

New York-based Verizon will keep its corporate name.

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