FCC delays vote on AT&T-BellSouth deal

Friday, November 3rd 2006, 3:27 am

By: News On 6

WASHINGTON (AP) The final regulatory hurdle facing AT&T Inc.'s acquisition of BellSouth Corp. got a bit higher when the Federal Communications Commission delayed a vote, for the third time, on whether to approve the proposed deal.

Commissioners had been expected to vote on the deal at an open meeting Friday, but they yanked the item from the agenda a day earlier because they were unable to decide what conditions should be placed on the deal. A vote was not rescheduled.

The agency was working with AT&T much of the week in an attempt to reach a compromise but was still facing a potential 2-2 vote. A tie raises the possibility that the fifth and newest commissioner, Robert McDowell, a Republican appointee who has taken no part in the proceeding, may be pulled in. McDowell is a former lobbyist for a trade group that opposes the merger.

The Antitrust Division of the Justice Department cleared the deal, valued at $83.4 billion at the close of trading Thursday, on Oct. 11, declaring that there were no competitive concerns and opting not to require the combined company to divest any assets or make any other concessions.

The failure to attach conditions sparked a sharp response from the two Democratic commissioners, Michael Copps and Jonathan Adelstein, who accused the Justice Department of failing to protect consumers.

FCC Chairman Kevin Martin had scheduled the Friday vote after twice delaying the decision. The issue was pulled from the Oct. 12 agenda, and a special meeting to consider the acquisition on Oct. 13 never convened after Copps and Adelstein asked for more time to consider last-minute concessions offered by AT&T.

Those concessions included $10-per-month Internet access in its service area, free modems, promises to freeze prices temporarily for competitors that use the company's networks, and even a pledge to bring back some BellSouth jobs shipped overseas.

A consortium of consumer groups criticized the concessions as "short-term candy for a few instead of long-term lower prices and better choices for all consumers."

The company, in a statement released Thursday night, said it had offered "unprecedented conditions unrivaled by any other communications provider in a merger proceeding." The company blamed the "self-interest of commercial entities and their litany of unreasonable demands" for the delay.

AT&T's acquisition of BellSouth is being called the largest telecommunications merger. The combined company would generate $117 billion in revenue and operate 68.7 million local phone lines across 22 states stretching coast to coast across the southern United States and up through the Midwest. It would employ 309,000 people, though AT&T said it plans to eliminate up to 10,000 jobs over three years.

Consumer groups are asking for promises that AT&T not discriminate against certain kinds of Internet traffic and offer reasonably priced digital subscriber line service without requiring customers to buy a bundle of services.

Consumer groups and competitors also want the FCC to force AT&T to divest unused wireless spectrum unless it plans to use it.

McDowell once worked for the trade association COMPTEL. Federal ethics regulations permit the FCC's general counsel to clear McDowell to vote as long as the "interest of the government in the employee's participation" outweighs any concerns about the how the vote may affect the agency's integrity.

The rules also say that once cleared by the general counsel, an employee "may not thereafter disqualify himself from participation." However, nothing would prevent him from abstaining.

Blair Levin, who was chief of staff for former FCC Chairman Reed Hundt and is now a telecommunications industry analyst for Stifel, Nicolaus & Co., predicted McDowell will be called on to vote if the stalemate continues.

"At some point in time, and I think that time is quickly approaching, the general counsel is entitled to declare a deadlock," he said.

Levin predicted that McDowell, despite the difficult position he is in, would not abstain.