Mon, 10/31/2005 - 7:00pm

Copyright 2005 Gannett Company, Inc.


November 1, 2005, Tuesday, FIRST EDITION

Paul Davidson

From LexisNexis

The SBC-AT&T and Verizon-MCI mergers cleared their final federal hurdle Monday, when the Federal Communications Commission approved the landmark deals but imposed conditions on the merger partners.

Those concessions are intended to promote residential phone competition, limiting prices for business customers and preventing the companies from disrupting the flow of Internet traffic. The companies agreed to the requirements, which will be in effect for two to three years, after negotiations with FCC commissioners through the weekend.

Kevin Martin, the FCC's Republican chairman, opposed any conditions but gave ground to win the votes of the two FCC Democrats. The FCC is split along partisan lines, with one seat unfilled.

The deals will reshape the industry by letting the USA's two biggest local phone companies swallow the two largest long-distance carriers.

The FCC requirements drew mixed reaction.

"These are more sweeping and deeper conditions than were anticipated," says Andy Lipman, a Washington lawyer who represents small telecom companies. But Earl Comstock of CompTel, a trade group that represents some of those companies, says because of their limited duration, the concessions are "a drop in the bucket."

One condition would require SBC and Verizon to offer their DSL broadband services without forcing customers to also subscribe to the companies' phone services.

But consumer advocates say nothing would stop the companies from charging virtually the same price for standalone DSL as for a phone-broadband package. "It might be at such an astronomical price that it won't be a very useful service," says Consumers Union director Gene Kimmelman.

Michael Copps, a Democratic FCC commissioner, said he hopes the FCC has "the good sense" to crack down on such practices.

Martin said in an interview: "It's competition between phone (companies) and cable (providers) that's driving prices down."

Other conditions will, for up to 30 months:

*Prevent SBC and Verizon from blocking consumers' access to competing Internet-based phone services or websites.

*Require SBC and Verizon to keep the setups AT&T and MCI have with other big Internet traffic carriers to exchange data at no charge.

*Freeze the wholesale rates that all four companies charge smaller rivals to lease their networks to serve businesses.

The Justice Department cleared the mergers last week after the companies agreed to modest divestitures of business lines. The SBC-AT&T deal is set to close by year's end. Verizon's takeover of MCI is to close by early next year.


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