WASHINGTON—Sprint Nextel Corp. urged the Federal Communications Commission Monday to reject the proposed $67 billion merger of AT&T Inc. and BellSouth Corp. because of the negative affect it will have on “special access”—dedicated lines used by wireless carriers to transmit calls from base stations to mobile switching centers.
“The merger of AT&T and BellSouth will maintain and strengthen the combined company’s incentive to use its dominance in the provision of special access to disadvantage its wireline rivals as well as the commercial mobile radio service competitors of Cingular Wireless L.L.C.,” said Robert Foosaner, Sprint Nextel’s senior vice president of government affairs.
Sprint Nextel’s remarks were among thousands of comments filed with the FCC on the merger.
Cingular is currently the nation’s largest wireless carrier. AT&T and BellSouth hold 60 percent and 40 percent stakes, respectively, in Cingular. AT&T and BellSouth announced their merger plans in March.
Sprint Nextel, the nation’s third-largest wireless carrier, believes it will be at an even greater disadvantage if Cingular does not have to compete nationwide for special-access services. Foosaner argued that, if the FCC approves the merger, it should impose specific conditions on the issue.
“If it approves the proposed combination the FCC must adopt remedial measures to ensure that competitive local exchange carriers and CMRS providers obtain access to reasonably priced special-access services they need in order to compete with the merged company,” said Foosaner.
Imposing merger conditions related to special access would not be unique. The FCC instituted a similar condition in the recently completed merger of SBC Communications Inc. and AT&T Corp.—but the combination of AT&T and BellSouth would be even more harmful, said Foosaner.
“The merger of AT&T and BellSouth will result in even greater harms than those that led the FCC to adopt conditions as part of the SBC-AT&T merger,” he said. “The commission found it necessary to ensure the merged company would not be able to raise rivals’ costs by increasing the rates for special-access services not only to specific buildings in SBC’s territories, but on a metropolitan service area-wide basis as well.”
Sprint Nextel was not the only company to voice its concern over the proposed transaction. A group of competing carriers argued the tie-up would amount to a monopoly.
“The time has now come when the FCC must ask itself, ‘Are we going too far this time?’ This merger will do nothing to bring more competition and choices for consumers and businesses. It will concentrate even more market power in the new AT&T, which is quickly reassembling the old Bell System. The FCC needs to say that enough is enough, and stop the incessant effort of AT&T to reestablish its nationwide wireline monopoly by using monopoly profits to gobble-up its competitors, rather than by competing for customer loyalty through innovation and service.” said Heather Gold, senior vice president of government relations at XO Communications.
Cbeyond Communications, Grande Communications, NuVox Communications, Supra Telecom, Talk America, and Xspedius Communications joined XO’s arguments.
In other comments filed on the merger, consumer groups said the combined company should be required to sell either Cingular or its spectrum in the 2.3 GHz and 2.5 GHz band.
Consumers Union, Consumer Federation of America, Free Press and U.S. Public Interest Research Group told the FCC they prefer an outright rejection—or in lieu of that a divestiture of the company’s wireless assets.
“Congress and federal regulators need to look carefully at the lifeless ‘competition’ their flawed policies have created and reject this merger,” said Gene Kimmelman, vice president for federal and international affairs for Consumers Union. “The government has been deceived before by promises that somehow more concentration would produce more choices and competition, when the result has been just the opposite. It shouldn’t be fooled again.”
Selling Cingular would create more opportunities for competition between wireless and wireline, said Kimmelman, adding that selling the wireless broadband assets in the 2.3 GHz and 2.5 GHz band would enhance prospects for a national wireless broadband competitor to the cable TV-landline telephone broadband duopoly.
With Republican Robert McDowell sworn in as the newest FCC commissioner, giving FCC Chairman Kevin Martin a GOP majority, it is unclear whether consumer groups and others will have success trying to attach conditions to the proposed AT&T-BellSouth merger. Democrats have been more prone than Republicans to impose conditions and/or seek concessions as prerequisites for telecom-merger approvals. At the same time, McDowell once lobbied for competitors to Bell telephone companies.
