WASHINGTON-Sprint Nextel Corp. urged the Federal Communications Commission to reject the proposed $67 billion merger of AT&T Inc. and BellSouth Corp. because of the negative impact it would 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 VP of government affairs.
Sprint Nextel’s remarks were among thousands of comments filed on the merger.
Cingular is 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 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.”
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.
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,” 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, 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.
Selling Cingular would create more opportunities for competition between wireless and wireline players, 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.
The National Association of State Utility Consumer Advocates opposes the proposed AT&T-BellSouth combo and said the agency’s past approval of major telecom mergers has shortchanged consumers.
“Few if any of these public benefits, such as cost savings and new services, have materialized,” stated NASUCA. “In some cases, the commission imposed conditions on the mergers; in the later cases, this strategy was pretty much abandoned. The benefits of the conditions were minimal and short-lived.”
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 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.
In addition to industry and consumer opposition to the deal, there is the added wrinkle of the American Civil Liberties Union’s call for the FCC to investigate allegations that AT&T and BellSouth supplied the National Security Agency with phone-call records. BellSouth and Verizon Communications Inc., Verizon Wireless and T-Mobile USA Inc. have denied turning over phone data to the NSA as part of its anti-terrorism surveillance program. AT&T has remained silent on alleged participation in the program. “We are not asking the FCC to investigate the NSA,” said Barry Steinhardt, director of the ACLU’s Technology and Liberty Project. “We are simply asking the FCC to do its job and determine what the telecom companies have done in the past and intend to do in the future. There is absolutely no reason they can’t find out whether the law was broken without revealing legitimate state secrets.”
