McDowell bows of out merger vote, rejects ‘Swiss cheese’ ruling

WASHINGTON-Federal Communications Commission member Robert McDowell officially disqualified himself from consideration of the stalled $79 billion merger of AT&T Inc. and BellSouth Corp., blasting the agency’s top lawyer’s legal argument supporting his participation and denying Chairman Kevin Martin the tie-breaking Republican vote to possibly clear the deal before year’s end.
“In all candor . I had expected a memorandum making a strong and clear case for my participation. Instead, the authorization memo is hesitant, does not acknowledge crucial facts and analyses, and concludes by framing this matter as an ethical coin-toss frozen in mid-air . While I expected the legal equivalent of body armor, I was handed Swiss cheese,” said McDowell.
FCC General Counsel Samuel Feder on Dec. 8 authorized McDowell to join fellow GOP Commissioners Martin and Deborah Taylor Tate and Democratic Commissioners Michael Copps and Jonathan Adelstein in reviewing an AT&T-BellSouth merger whose resolution has been delayed for weeks because of differences among parties over concessions sought by top wireless operators, consumer groups and Democrats.
“We believe this is a setback for AT&T-BellSouth’s merger strategy and adds to uncertainty about the proceeding, but we do not expect the deal to be rejected,” said analysts at Stifel, Nicolaus & Co Inc.
McDowell, a former lobbyist for the Comptel trade group that represents competitors to AT&T and BellSouth, said in August he would not be involved in the FCC’s analysis of the AT&T-BellSouth merger because of government conflict-of-interest rules.
“I appreciate Commissioner McDowell’s thoughtful consideration and respect his decision to abstain,” said Martin. “My goal in recent weeks has been to ensure that the commission acted on the transaction. The commission is not obligated to reach a particular outcome. However, the commission is responsible for making a determination in a timely fashion. With Commissioner McDowell having made his decision, I will continue to try to work with my colleagues to bring our consideration of this merger to conclusion.”
Capitol Hill applauded McDowell’s action.
“Commissioner McDowell showed great integrity today by deciding to abstain from participating in the AT&T-BellSouth merger,” said Teri Rucker, a spokeswoman for the Senate Commerce Committee, which will swing to Democratic control next month. “McDowell has removed the ethical cloud his participation would have created and the companies should now have the incentive to negotiate with the other four commissioners. We hope that AT&T and BellSouth will finally be willing to come to the table with serious proposals that will protect consumer interests and preserve a competitive marketplace.”
Rep. John Dingell (D-Mich.), incoming chairman of the House Commerce Committee, agreed. He also issued a warning that seemed directed at Copps and Adelstein.
“With the closing of this ungainly sideshow, the commission can get on with the proper performance of its duties,” said Dingell. “Now more than ever, the four remaining commissioners have a responsibility to analyze the transaction carefully, fairly and openly, and in a way that avoids imposing burdens that have nothing to do with the transaction. The continued recusal of Commissioner McDowell should not be viewed as an opportunity for individual commissioners to extract carte blanche from the merging parties.”
Rep. Edward Markey (D-Mass.), expected to head the House telecom and Internet subcommittee in the 110th Congress, also pushed for timely disposal of remaining issues preventing an FCC vote on the AT&T-BellSouth merger. But the lawmaker said the substance of what the FCC ultimately decides is important as well.
“I urge Chairman Martin, as well as Commissioners Copps, Adelstein, and Tate, to proceed with discussions over how to resolve remaining issues in
contention and to approve or disapprove the merger in timely fashion,” said Markey. “If a majority of the remaining commissioners decide to approve the merger, I believe the public interest compels that such approval should only come with effective and enforceable conditions to ensure consumer protection and competitive markets.”
AT&T continues to be frustrated by the hold-up.
“Our merger is in the best interest of consumers, the economy and the nation,” said AT&T. “A broad range of individuals and organizations- including the Communications Workers of America-have voiced their support for the merger and the pro-consumer conditions we have offered. State regulators, minority organizations, small business groups, educational and community groups and elected officials from both the Democratic and Republican parties have all recognized the concrete benefits that our merger brings to consumers and the public interest . We have sought the support for this merger from every member of the commission since the very beginning and we will continue to do so. We will-as we have always done-do our part to bring the merger review to a bipartisan completion as quickly as possible.”
A key element in the debate over whether McDowell should remain recused from the AT&T-BellSouth proceeding is an ethics agreement prepared by Feder during the Senate confirmation process that for one year bars McDowell from participation in any matter in which Comptel is a party. McDowell disclosed the ethics agreement in his statement to remain on the sidelines of the FCC’s AT&T-BellSouth merger review; why McDowell and Feder chose not to reveal its existence before now is unclear.
The pending telecom merger would combine AT&T’s 60-percent ownership and BellSouth’s 40-percent ownership of Cingular Wireless L.L.C., the top U.S. wireless operator.
Mobile phone and wireless broadband companies are mostly concerned about issues outside Cingular Wireless ownership consolidation itself.
Sprint Nextel Corp. and T-Mobile USA Inc., the third- and fourth-largest wireless carriers, and others want conditions on special-access lines controlled by AT&T and BellSouth. The dedicated links carry traffic from wireless base stations to the mobile-switching center or to the public switched telephone network. The Government Accountability Office concluded in a recent report competition in special-access rates is generally lacking in major U.S. cities.
Clearwire Corp., for its part, wants the FCC to impose conditions on 2.3 GHz and 2.5 GHz wireless broadband spectrum held by AT&T and BellSouth.