AT&T-SBC Pact Threatens Demise of Competitors Giant Lobbyist

The competitive wireline industry could lose its heavyweight champion before the FCC and on Capitol Hill: AT&T Corp.

AT&T has been a lobbying machine fighting for the rights of competitors to access the local networks controlled by the regional Bell phone companies. Now, Old Ma Bells feisty rival will be its parent if the federal government allows SBC Communications Inc. to acquire AT&T. SBC expects the $16 billion agreement to close by the first half of 2006 following approval by the FCC, Justice Department and state regulators.

Analysts say the deal, even if and before it closes, will diminish AT&Ts role as a lobbying force for the competitive wireline industry at a time when Congress is gearing up to reform telecommunications law.

It is highly unlikely that AT&T will lobby aggressively against the Bells as it pushes for regulatory approval of the deal. Thus just by proposing the merger, SBC has taken out the biggest, most-well financed opponent in the 100-year-old Washington regulatory battle, says Medley Global Advisors analyst Jessica Zufolo in a research note.

AT&T may be a shell of its former self, but it is still a leviathan compared to most competitive phone companies, and has considerably more resources for high-powered attorneys and lobbyists than the companies born out of the Telecommunications Act of 1996.

AT&T spent about $4 million in lobbying at the federal level through the first six months of 2004, according to reports filed with the U.S. Senate. It spent about $3.8 million in 2003.

And since 1989, AT&T and its employees have given about $19.7 million to federal candidates and parties, according to the Center for Responsive Politics. AT&T is No. 17 among the top 100 donors, as measured by the group since 1989.

The AT&T-SBC combo will certainly affect lobbying efforts in that historically AT&T has been the largest contributor in terms of manpower and resources to the lobbying efforts of the competitive providers over the years, says Ernie Kelly, senior advisor to The KDW Group. I expect that AT&T will be asked or told to tone it down or cease and desist, depending on the issue, I suppose.

Who could replace AT&T in the legislative and regulatory wars? MCI Inc.? The former WorldCom, too, may fall to a Bell. The Wall Street Journal reported Thursday that Qwest Communications International Inc. has made about a $6.3 billion bid for MCI. MCI declined to comment on the report.

Asked how the AT&T-SBC combo would affect lobbying in Washington, an MCI spokeswoman said the company is not commenting on any aspect of the deal.

Asked whether AT&T and SBC would begin collaborating on policy issues, an SBC spokesman said, “No the two companies are operating separate entities until the merger is approved.

AT&T spokeswoman Claudia Jones says she cant speculate on AT&Ts agenda after the deal closes, but notes the company is continuing to focus its lobbying efforts on the enterprise market following its decision last summer to retreat from the traditional consumer market.

Our focus then became what we needed to become a competitor in the enterprise business space and thats where our focus is going to be and thats where our focus would have been anyway, Jones says.

But as the House of Representatives and U.S. Senate prepares to introduce telecom legislation in 2005 or 2006, the battle AT&T has aggressively waged for years preserving access to the incumbent phone networks is contrary to the interest of its impending parent: SBC, the No. 2 local phone company.

Another area where SBC and the other Bells will likely benefit is the diminished/removal of [AT&Ts] regulatory/lobbying presence in Washington during an expected rewrite of the Telecom Act, Legg Mason analysts write in a research note. Specifically with MCI and the CLECs greatly scaled back efforts and Sprint focused on pushing through its merger with Nextel, AT&T was the primary remaining competitive voice to confront the Bells.

Although AT&T may symbolize the traditional policy positions of the competitive wireline industry, Jason Oxman, general counsel for the Association for Local Telecommunications Services, points out there are hundreds of companies competing with incumbents like SBC.

The competitive industry is hundreds of companies [and] thousands of employees offering [service to] millions of consumers and businesses across the country, says Oxman, whose group represents about 35 competitive telecom companies. And certainly AT&T is a part of the competitive community but it is not the entirety of the competitive community and we will continue our efforts in the competitive community to promote facilities-based competition whether or not AT&T and SBC merge.

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