Groups to FCC: No AT&T-BellSouth Approvals Yet

Consumer and public interest groups are fighting back as media reports say FCC Chairman Kevin J. Martin has circulated a draft order approving the $67 billion AT&T Inc.-BellSouth Corp. merger. The document is said to contain few protections for competition or consumers, mirroring the limited approvals required for the Verizon Communications Inc.-MCI Inc. and AT&T-SBC Communications Inc. deals late last year.

The news comes as a federal judge in Washington, D.C., examines whether the Department of Justice (DoJ) placed enough requirements on the RBOCs to ensure competition once AT&T and MCI were taken off the market. Judge Emmet G. Sullivan is waiting for more evidence from the DoJ before he decides whether the governments requirement that AT&T and Verizon divest some of their unused fiber networks was sufficient and good for public interest. He has stated he is not prepared to rubber-stamp the DoJs consent of the megamergers.

On Monday, representatives of a coalition of groups calling for greater consumer and competition protections said the FCC is acting too soon (Washington insiders say commissioners well could vote on the AT&T-BellSouth merger at its October meeting). They cited price hikes, job losses and violations of privacy on AT&Ts part, as reasons not to approve the combination.

We believe the FCC has both a statutory and a public interest obligation to investigate whether or not AT&T and BellSouth have been engaging in illegal cooperation with the [National Security Agency] and spying on Americans, said Barry Steinhardt, director of the technology and liberty program at the American Civil Liberties Union (ACLU). We are very disappointed that the FCC has fallen down in its obligation to conduct this investigation.

The ACLU earlier this year told the FCC it is obligated to determine whether AT&T acted lawfully in helping the NSA obtain private phone record information. However, the FCC refused to address the matter.

Meanwhile, Charles Acquard, executive director of the National Association of State Utility Consumer Advocates (NASUCA), said that while the merger might be good for AT&T and BellSouth stockholders, it would not be beneficial for consumers. We believe that it will stifle competition and it will harm innovation, Acquard said.

A colleague representing the Consumer Federation of America (CFA) agreed. Were worried about the anticompetitive and anticonsumer impact of the merger, said Mark Cooper, director of research at the CFA. And, he added, we are unequivocally opposed to the merger going forward without the imposition of very significant conditions. AT&T is clearly one of the leaders in the fight to legalize redlining. They said they would serve 100 percent of upper-income people and 5 percent of low-income areas. So this entity will now have a larger territory in which to do their dirty work.

An AT&T spokesman downplayed such statements. There are always those who’ll try to use these proceedings to peddle their personal bugaboos, said Michael Balmoris. We’re confident the FCC and DoJ recognize the significant public interest and consumer benefits of our merger, as 18 states have now determined. We look forward to a speedy approval so we can begin delivering the benefits of innovative new services and increased competition to consumers.”

The coalition particularly is concerned about Martins draft order approving the AT&T-BellSouth transaction because of Sullivans ongoing examination of the other mergers. That case is based on the 1974 Tunney Act, which requires federal courts to approve antitrust consent decrees, or agreements, filed by the DoJ. A 2004 amendment allows a judge to independently determine whether mergers have served the public good. Cases based on the Tunney Act presume the government failed to consider the publics best interest.

Analysts had speculated Sullivans scrutiny of the Verizon-MCI and SBC-AT&T marriages might make approval of the pending AT&T-BellSouth deal more difficult, and Jeannine Kenney, senior policy analyst for Consumers Union, the nonprofit publisher of Consumers Reports, concurred. The Tunney Act proceeding should affect how the administration moves forward or doesnt move forward on this merger, but what is distressing is that it doesnt appear to have had that effect, Kenney noted. What the court has made pretty clear is that these mergers will be scrutinized more carefully, particularly for mergers of this magnitude. Given the record that FCC has before it, it is very difficult for us to understand how they can be moving forward this quickly.

The FCC would not comment on the draft order or the coalition’s conference on Tuesday.

Other organizations also have responded to reports that Martin is ready to give the AT&T-BellSouth deal a thumbs-up. Competitive carrier association COMPTEL late Friday asked the FCC to reject the proposed merger, and because that is highly unlikely called on the commission to enforce conditions regarding UNEs and special access. COMPTEL sent a letter to the FCC detailing proposed UNE-related merger conditions that would ensure continued access to unbundled loops and transport in the AT&T and BellSouth regions.

Earl Comstock, president and CEO, said such conditions could at least offset the anticompetitive harms of the proposed merger. Approving the proposed AT&T/BellSouth merger and allowing the Bell companies to further enhance their already prodigious market power will undermine competition, thwart innovation and broadband deployment, and hurt our nations economy, Comstock said.

There remains uncertainty as to whether new FCC commissioner, Robert McDowell, will vote on the AT&T-BellSouth deal. Even though he is a Republican giving Martin a 3-2 majority he came to the commission from COMPTEL, where he lobbied for competitive interests.

ACLU, Consumers Union, Consumer Federation of America, NASUCA

AT&T Inc.



Verizon Communications Inc.

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