WASHINGTON-Consumer groups and wireless carriers last week said AT&T Inc.’s proposed conditions to its $79 billion purchase of BellSouth Corp. are inadequate, creating uncertainty over whether the Federal Communications Commission can pull off a planned Nov. 3 vote on the deal.
“AT&T’s concessions are nothing more than short-term candy for a few instead of long-term lower prices and better choices for all consumers. Consumers will still wind up paying inflated prices when these two phone giants merge and dominate local, long distance, wireless and Internet services,” said Gene Kimmelman, senior vice president for Consumers Union.
The FCC twice has postponed votes on the AT&T-BellSouth transaction. The latest delay centered on revelations that AT&T had offered wireless, special-access and net neutrality conditions in response to outreach from FCC staff. FCC Chairman Kevin Martin subsequently put the proposed conditions out for public comment. Even before news of 11th hour contacts between Martin’s staff and AT&T lobbyists surfaced on the eve of the previously scheduled Oct. 13 vote by the FCC, merger criticism had elevated after the Justice Department’s unconditional approval of the telecom hook-up.
In their comments, Sprint Nextel Corp. and T-Mobile USA Inc. urged the FCC to strengthen conditions on special-access lines-dedicated links used to carry traffic from a wireless base station to a mobile-switching center and/or onto the public switched telephone network.
“As Sprint Nextel has previously shown in this proceeding, the merger of AT&T and BellSouth will 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, which will become a wholly-owned subsidiary,” stated the No. 3 mobile phone carrier. AT&T and BellSouth own 60 percent and 40 percent interests, respectively, in No. 1 cellular carrier Cingular Wireless L.L.C.
Sprint Nextel also reiterated it has no alternative to BellSouth or AT&T for more than 99 percent of Sprint Nextel’s CDMA cell sites in the merging companies’ service areas.
AT&T’s proposed special access line conditions are similar to those imposed last year by the FCC and Justice Department on the AT&T-SBC Communications Inc. and Verizon Communications Inc.-MCI Inc. Those deals are currently under review by a federal judge.
“Nationally, T-Mobile is a retail competitor of the applicants and their Cingular wireless affiliate, and T-Mobile is poised to become an important competitor in the emerging `intermodal’ marketplace for local exchange services of which these ILECS (incumbent local exchange carriers) are the dominant providers in their regions,” said T-Mobile USA Inc., the No. 4 mobile phone operator. “The record in this proceeding demonstrates that the proposed AT&T-BellSouth merger raises serious concerns about competitive special access services.”
In its comments wireless broadband provider Clearwire Corp. said AT&T’s promise to launch 10 wireless broadband Internet trials in either the 2.3 GHz or 2.5 GHz band (at least five in BellSouth’s territory) is not good enough.
“The conditions proposed by AT&T do absolutely nothing to alleviate the anticompetitive effects of its acquisition of BellSouth’s 2.5 GHz spectrum,” Clearwire said. “The merger will enhance AT&T’s incentives and capability to use the 2.5 GHz spectrum holdings anticompetitively and to delay, disrupt and impede the development of an emerging independent nationwide mobile wireless broadband platform using WiMAX technology.”
As such, Clearwire said the FCC should require BellSouth to divest its 2.5 GHz holdings, echoing the sentiments of consumer advocates and some lawmakers on Capitol Hill.
However, the FCC is likely to follow the pattern on its decision clearing Sprint Corp. to buy Nextel Communications Inc. The FCC directed Sprint to meet certain benchmarks for wireless broadband service at 2.5 GHz, a frequency band in which Sprint Nextel holds scores of licenses and leases throughout the country.
Despite all the fireworks, telecom analysts predict the FCC will approve the merger with some conditions next month.
