WASHINGTON-While consumer advocates, organized labor, industry analysts and lawmakers gave mixed reviews to AT&T Inc.’s proposed $67 billion acquisition of BellSouth Corp.-co-owners of Cingular Wireless L.L.C.-most signs point to the Federal Communications Commission as the major battlefield for hashing out the blockbuster deal and to the Bush telecom appointee who could be key to the agency’s treatment of the transaction.
Consumer advocates were quick to urge the Justice Department to block the deal. “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.” He added: “If approved, this merger will lead to higher local, long-distance and cell-phone prices for consumers across the country.”
Rep. Edward Markey (D-Mass.), ranking member of the House telecom and Internet subcommittee and a vocal consumer advocate, said the AT&T-BellSouth deal deserves a good, hard look by policymakers.
“Twenty years after the government broke up Ma Bell, this deal represents a mother and child reunion. Our nation’s telecommunications markets must be vigorously competitive and open to innovation in order to promote job creation and economic growth. This merger proposal is one that unquestionably merits the utmost scrutiny by government antitrust officials. In addition, I believe lawmakers should thoroughly review this merger proposal to fully assess its impact on consumers and competition,” said Markey.
Sen. Daniel Inouye (D-Hawaii), ranking member of the Senate Commerce Committee, sounded a similar note. “The proposed recombination of two of the remaining four Baby Bells will call into question our commitment to promote competition in the communications marketplace and to preserve fair rules that guarantee nondiscriminatory access to new services,” said Inouye. “Coming only 125 days after the FCC’s approval of the SBC Communications Inc.-AT&T [Corp.] merger, AT&T’s proposal to purchase BellSouth would remove yet another potential competitor from the communications marketplace and calls into question whether the future of communications policy will be marked by strategies to promote vigorous competition or by further efforts to facilitate new mergers.”
Sen. Ted Stevens (R-Alaska), chairman of the Senate Commerce Committee, said he did not entirely share Inouye’s views.
“I’m going to keep an open mind about this because I think we’ve seen changes. …We lost AT&T and then all of a sudden it comes back in a new form. And, it’s not really Ma Bell we’re looking at now,” Stevens told reporters.
Stevens’ counterpart in the House, Rep. Joe Barton (R-Texas), expressed even less concern about the AT&T-BellSouth deal.
“I don’t have a generic concern. I think if you follow the telecommunications industry, there is a reintegration or reconsolidation. It is inevitable. It is not inevitable about whose doing what, but I think it is natural to see the synergy come back to combine some of the wireless, the long distance with the old Bells, and now some of the geographic Bells consolidation,” said the House Commerce Committee chairman.
The nation’s largest communications union said the acquisition represents a critical opportunity to create jobs for a new telecom company better able to complete in an increasingly global marketplace.
“CWA hopes that this announcement will mean a new day for U.S. policymakers, consumers and workers in this industry. We need to make sure that government, policymakers and citizens truly grasp the promise of this industry. Equally important is that our potential to regain the global lead in communications services as the backbone of our economy not simply be an adjunct to entertainment for the rich and upper middle class,” said Larry Cohen, president of the Communications Workers of America.
AT&T said it expects the combined company’s workforce to be reduced by at least 10,000 employees during the next three years. Candice Johnson, a spokeswoman for CWA, said Cohen’s comments on the deal do not necessarily represent an endorsement of the transaction.
Stifel, Nicholas & Co. analysts said they expect the Justice Department and FCC to sign off on the transaction, with federal approvals of last year’s mergers between Bell and long-distance firms suggesting there might be only minor conditions placed on the deal.
“In the long run, we believe the deal creates a more formidable competitor to Verizon [Communications Inc.] in the enterprise and wireless markets and for cable in video and high-speed data,” said Stifel Nicholas.
One think tank warned a telecom deal of this size is vulnerable to exploitation by special-interest groups. “This transaction has appeared inevitable and desirable for broadband consumers, particularly in the South. The only surprise is that it happened so quickly,” said Ray Gifford, president of Progress & Freedom Foundation and former chairman of the Colorado Public Utilities Commission.
“The Department of Justice will look at the competition policy issues rigorously, but at first glance the merger appears to present no great problems. This is a horizontal merger between companies with no overlapping territories or assets. On the wireless side, it is simply a majority owner buying out the minority interest. To be sure, every rent-seeker and special interest will come hat-in-hand to the government seeking special conditions and taxes on this merger, but from a pure competition standpoint it would appear to offer a combined entity that is better capable of building out broadband to consumers.”
Some have criticized the FCC for attaching conditions to telecom mergers under the agency’s public-interest standard and duplicating antitrust analysis performed by the Justice Department.
Meantime, Bush’s FCC nominee Robert McDowell, a Republican lobbyist at a trade association whose members compete against Bell giants, arguably could be more influential to the merger analysis than any of the lawmakers or special interests. A bigger question for McDowell, if confirmed, could be whether his background as a telecom lobbyist complicates his participation in FCC proceedings-including the AT&T-BellSouth deal.
