Approval of Telecom Deals Draw Fire

Consumer activists claim the SBC-AT&T and Verizon-MCI combinations are anticompetitive; FCC commissioners were divided on conditions.
Craig SchneiderOctober 31, 2005

The Federal Communications Commission on Monday approved the $16 billion merger of SBC Communications with AT&T and the $8.6 merger of Verizon Communications with MCI.

Unlike last week’s go-aheads by the Department of Justice, which dealt solely with antitrust matters, the FCC approvals required that the agency consider, in a broad sense, the public interest. Although regulators voted 4-0 in favor of adding several conditions to the deals, according to the Associated Press, some critics maintain that these conditions aren’t stringent enough.

SBC and Verizon will be required to freeze the wholesale prices they charge competitors to lease high-capacity business lines, reported Reuters. According to the wire service, the two companies will also be required to sell Internet access even to customers that do not subscribe to local phone service; to permit customers to surf anywhere they choose on the Internet and use any applications on it; and to continue swapping Internet traffic with the same number of providers that they do now.

Reportedly, FCC chairman Kevin Martin did not want to impose any conditions, believing that affected markets would remain “vibrantly competitive.” But that perspective was not shared by two Democrats on the four-member panel, the AP reported, and Martin eventually relented.

Democratic commissioner Michael Copps would have liked to push for greater restrictions, according to the AP, but the agreed-upon conditions are “designed to address numerous possible harms to competition and to consumers, as well as to protect the openness and innovation that must always characterize the Internet.”

Likewise, Qwest Communications — which withdrew its bid for MCI earlier this year — was reportedly rebuffed in its claims that either Verizon or MCI should sell off assets in certain overlapping areas to ensure competition. And Gene Kimmelman — senior director of public policy for Consumers Union, publisher of Consumer Reports, reportedly stated that “the FCC promises cross-technology competition with Internet phone service on cable and telephone systems, but the commission has failed to ensure that consumers will receive meaningful choices at fair prices.”

While the FCC’s approval was the final federal hurtle, several more state regulatory agencies are still needed, according to the AP. A Legg Mason analyst quoted by Bloomberg, however, noted that these are “done deals” because the remaining states are “not raising issues.”

SBC expects its merger to close by the end of the year; the company plans to adopt the AT&T name. Verizon, which also expects to close by late this year, will keep its name.

4 Powerful Communication Strategies for Your Next Board Meeting