FCC Delays Merger Vote for More Comment

The FCC late Fri. formally called for comment on the AT&T proposals, with an Oct. 24 deadline. Attached to the document was an AT&T ex parte letter outlining proposed conditions that touched on special access, “broadband accessibility,” UNEs, naked DSL and other matters: “In response to an inquiry from Commission staff, we indicated that, in the interest of facilitating the speediest possible approval of the merger by the Commission, we would not object to the imposition of certain merger conditions previously proposed by certain parties in this proceeding and requested by the Democratic commissioners.”

Among details: (1) By Dec. 2007, the merged company “will offer broadband Internet access service… to 100 percent of the residential living units in the AT&T/BellSouth in-region territory.” (2) By June 1, 2007, AT&T “will make its disaster recovery capabilities available to facilitate restoration of service in BellSouth’s in-region territory in the event of an extended service outage.” (3) The combined company will continue to offer UNEs and colocation service without seeking an increase in state-approved rates. (4) AT&T will implement a service quality measurement plan for special access like one in the SBC-Ameritech merger conditions. (5) The company “shall initiate ten new trials of broadband Internet access service using 2.3 GHz or 2.5 GHz spectrum by the end of 2007” with at least 5 of those trials conducted in BellSouth’s territory. (6) The company will offer ADSL service to customers “without requiring such customers to also purchase circuit switched voice grade telephone service.”

Congressional leaders scolded the FCC for delaying its ruling, urging it “act expeditiously,” in a statement from Senate and House Commerce Committee Chmn. Stevens (R-Alaska) and Barton (R-Tex.). At least 60 entities filed 10,000-plus initial comments and almost 600 replies, the statement said, suggesting this shows review was “thorough and complete.” It said: “We certainly hope that the delays requested… are substantive in nature, although the Commission has had ample time to debate the merits of AT&T’s acquisition of BellSouth.” The FCC “has a responsibility” to act quickly, so consumers can benefit from a “stronger video and broadband provider in BellSouth’s 9-state region,” it said.

The delay was announced after about 2 dozen spectators and media waited 3 hours plus for a scheduled agenda meeting to begin. The Commission never entered the meeting room.

Agreeing to a delay sought by Democratic Comrs. Copps and Adelstein may have saved Martin from a tougher problem -- a 2-2 vote. Talks with Copps and Adelstein over conditions hadn’t succeeded midday Fri. Meanwhile, the 3rd Republican, FCC Comr. McDowell, hasn’t been participating. McDowell used to work for CompTel, which has filed comments in the merger proceeding. A further complication was Martin’s Asia trip, starting Oct. 14 and involving a week in China and Japan.

Copps and Adelstein sought more time to get public input on the conditions. In a letter sent to Martin earlier in the day, the Democrats said new proposals have been made “in the last 48 hours” that “raise a number of significant questions and complex technical issues for us to consider.” They asked Martin to “take this proceeding off Sunshine,” meaning remove it from the agenda for Fri.’s open meeting so parties could comment on the proposed conditions. “Public comment could be handled on an expeditious basis, need not cause unnecessary delay and could be completed well in advance of the time frames used by the Commission to review other recent mergers,” the letter said.

Martin responded within about 2 hours, declaring the vote would be delayed to give the Democrats “more time to evaluate the proposals.” Martin said many of the proposals involved “have previously been filed by other parties and have been commented upon already [but] in any event, I have instructed staff to place these proposals out for public comment” for 10 days. Copps and Adelstein issued a statement saying “the public interest is served by the Commission inviting further public comment concerning the AT&T-BellSouth merger.”

The conditions offered by AT&T triggered strong objections by NuVox and XO Communications. The CLECs filed a petition late Thurs. accusing AT&T of violating ex parte rules and demanding that the FCC disclose the AT&T proposals. NuVox and XO cited AT&T Senior Vp Robert Quinn’s statement to the news media that AT&T “put a full set of conditions on the table that are reasonable and protect consumers.” The CLECs said in a statement: “Even if provided in response to a Commission request for information, AT&T’s ex parte presentations must be disclosed to the public if the presentation involves ‘new information regarding the merits’ of the proceeding.” AT&T’s “back-room advocacy” leaves no room for their side to respond, they said.

An AT&T spokesman said the company is “open to discussing with the Democratic FCC commissioners reasonable conditions on the merger in order to obtain unanimous approval, so long as they do not affect our ability to deliver merger benefits to customers and shareowners.” Nonetheless, “we firmly believe… that no conditions on this merger are necessary for this combination to be a public benefit,” he said. Answering the NuVox-XO complaint, the spokesman said conditions offered by AT&T earlier responded to a request from the Commission, as ex parte rules allow: “The sunshine rules do not prohibit the Commission from contacting parties. And that’s exactly what has taken place. We were responding to questions about various voluntary commitments proposed by the Commission.”

By seeking comment, the FCC “has taken a step that ends the secret negotiations that have begun to characterize the merger process,” said Media Access Project Pres. Andrew Schwartzman. MAP is “increasingly unhappy” with the way the ex parte rules are handled at the FCC, he said. “The Democratic commissioners got a big win” by gaining a public comment period,” a CLEC official said. “Consumers and competing carriers will now have the opportunity to see what AT&T is proposing instead of finding out after the backroom deal is struck.”

CompTel Pres. Earl Comstock said CompTel is “grateful for the time to comment on the proposed conditions.” He called the FCC move “consistent with the principle of allowing parties who will be affected by the merger, and any conditions placed thereon, to be heard prior to any determination that the merger is in the public interest,” he said.

The conditions probably will look like those on the SBC- AT&T and Verizon-MCI mergers, Stifel Nicolaus analysts said: “To win Democratic support and reduce partisan controversy, the Republicans would likely need to make some further concessions to the Democrats -- through extensions, tweaks, and/or targeted new requirements -- but we continue to believe AT&T and BellSouth will be very reluctant to go beyond modest additions.”