COLORADO SPRINGS, Colo. The Federal Communications Commission (FCC) approved the $86 billion merger of AT&T and BellSouth late Friday (Dec. 29).
The move came only after Democratic Commissioners Michael Copps and Jonathan Adelstein received assurances from AT&T that the combined company would assure "net neutrality" in packet prioritization, allow certain existing customers low-cost high-speed Internet access, and bring some 3,000 jobs back to the United States which BellSouth had sent offshore.
While Copps and Adelstein released long statements indicating that the Republican commissioners had been ready to approve the merger without any preconditions, in the end all commission members agreed to the merger as reflecting the true state of industry consolidation. The FCC, in a joint statement, said that the merger would carry advantages of speeding broadband in the combined footprint of the two companies; allow the merged company to compete with advanced pay TV services by offering IPTV; enhance national security and disaster recovery through the use of end-to-end IP transport; and improve wireless services through unified management of Cingular Wireless.
The IPTV offerings proved to be contentious with Dave Burstein, analyst with DSLPrime newsletter, who said that the creation of a dedicated network using Alcatel routers and special Microsoft TV software tools would cast serious doubts on AT&T's promises of net neutrality.
The concept of "net neutrality," which AT&T chief executive Ed Whitacre said he did not understand as the merger discussions began, would place limits on the company's ability to offer "premium services" by giving business customers, or consumers willing to pay higher rates, a special routed service on top of normal broadband access. Burstein argued that offering IPTV in effect creates a service that violates concepts of net neutrality.
Merger opponents had been effective enough in lobbying the FCC that they had urged Congress to examine an initial list of conditions that AT&T had offered to the commission on Oct. 13. Consequently, AT&T made a second set of offers on Dec. 28. Among the new conditions offered were:
the repatriation of 3000 outsourced BellSouth jobs by Dec. 31, 2008, with a promise that at least 200 jobs would be in New Orleans;
the offer of broadband service in excess of 200 Kbits/sec to 100 percent of customers in its territories, with at least 85 percent being based on DSL technologies; that ADSL modems be offered for free to residential subscribers replacing dial-up with a term plan between July 1, 2007 and June 30, 2008;
that U-Verse video services would be rolled out to at least 1.5 million homes by the end of 2007;
that AT&T and BellSouth merge disaster recovery capabilities as quickly as possible; that $1 million be donated to general public safety;
that no changes are sought at the state level in rates for Unbundled Network Elements;
that network neutrality in packet routing will be encouraged;
and that various benchmarks be met in transactions for interconnect with competitive carriers.
The commission found in its ruling that the merger would not have a significant adverse effect in retail enterprise competition, mass-market voice competition, mass-market Internet competition, Internet backbone competition, or international competition.
Copps and Adelstein concurred with the majority opinion of Commission Chairman Kevin Martin and Commissioner Deborah Tate, but issued eight-page statements indicating their reasons for concluding the new round of agreements would protect competition.
Copps said that "we celebrate today not a triumph for huge corporate mergers but a modest victory for American consumers."