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FCC Clears the Way for AT&T-BellSouth Merger

By Martin H. Bosworth
ConsumerAffairs.com

September 25, 2006

AT&T • Long Distance • Local • Wireless • Uverse • DSL --- News • NY to AT&T: Please Deposit $2.63 Million • AT&T Agrees to Refund Some Ringtone Charges • States Asked to Probe AT&T U-Verse Explosions • AT&T Exits Pay Phone Business • AT&T Changes Contract Policy • AT&T Changes Terms Of Service After Outcry • AT&T Agrees to New Stolen Cell Phone Rules • AT&T Stiffens Language Covering Objectionable Content • AT&T Adds Parental Controls To Mobile Phones • AT&T Slammed Over Rebate Policies • Appeals Court Shreds AT&T Arbitration Clause • Court OKs Rebate Lawsuit against Cingular/AT&T • AT&T Trashes Cingular Brand • AT&T Offers Net Neutrality Concessions To Win Merger Approval • FCC Delays Decision On AT&T/BellSouth Deal • Justice Department Green Lights AT&T-BellSouth Merger • FCC Clears the Way for AT&T-BellSouth Merger • AT&T Trumpets New TV Service • AT&T Web Site Hacked; Customer Data Exposed • AT&T Sues Calling Record Brokers • AT&T Declares Consumers' Personal Data "Corporate Property" • AT&T Plans to Kill Cingular Name • Report: AT&T Acquiring BellSouth • SBC Recast as AT&T • FCC approves AT&T, MCI Deals • Justice Dept. OKs AT&T, MCI Sell-Outs • SBC Will Keep AT&T Name • Consumer Groups Oppose Big Telco Mergers • SBC Buys AT&T • AT&T Will Pay Refunds to New Yorkers • AT&T Will Pull Out of 7 States • AT&T Teams With Sprint to Return to Wireless Business • Minnesota Sues AT&T • Class Action Charges AT&T With Slamming • Another AT&T Rate Hike • AT&T Hiking Minimum Fees • AT&T Faces $780,000 Do-Not-Call Fine • AT&T Will Run Do-Not-Call List • Supreme Court Denies AT&T's Appeal of Arbitration Ruling

Federal Communications Commission (FCC) chair Kevin Martin is planning to endorse the merger of two of Ma Bell's biggest children without any conditions, insiders report.

The AT&T-BellSouth merger will create the world's single largest telecommunications company and cost $67 billion to complete.

Martin has recommended that the merger be placed on the FCC's agenda for its next formal meeting, scheduled for Oct. 14th. Martin's request is unusual in that the Justice Department has yet to complete its review of the proposed merger for potential harm to consumers and competition.

Spokespersons for both AT&T and BellSouth predictably hailed the move and urged a speedy approval for the massive telco merger.

Consumer groups such as Consumers Union criticized it as too hasty and not fully recognizing the potential price hikes such a merger could create.

The merger would give AT&T full control of Cingular Wireless, the nation's largest wireless service provider, and extend AT&T chair Ed Whitacre's reach into the South, BellSouth's largest market.

ConsumerAffairs.com receives a regular stream of complaints from disgruntled former AT&T customers regarding Cingular's billing practices, customer service, and product reliability.

Although Martin proposed the merger unconditionally, sources say that the other FCC commissioners may want to weigh in on the merger rather than offer rubber-stamp approval.

The newest appointee to the FCC, Republican Robert McDowell, was a lobbyist with COMPTEL, a telecommunications association that represented competitors to AT&T, and may have to recuse himself from the case as a result.

Without McDowell assuring a Republican majority vote on the FCC panel, the Democrat members of the FCC may push for conditions such as ensuring the new merged company respects the rules of "net neutrality," the right to access all content on the Internet freely and equally.

Similar restrictions were placed on the approval of other mega-mergers such as Verizon and MCI, which Martin also wanted approved without conditions.

The FCC circulated a memo asking for public comment on the net neutrality issue, leading observers to say that the move was designed to prevent the issue from impeding the specific AT&T-BellSouth deal by making it an "industry-wide" issue.

Martin, a close ally of the Bush administration and former Special Assistant to the President, has echoed the White House's stance on net neutrality by saying no serious net neutrality protections are needed.

During his tenure as FCC chief, the agency has focused the bulk of its attention on indecency issues on television, levying record fines on television networks for profanity, displays of sexual activity and so forth.

During Martin's tenure, the FCC moved to grant telecommunications companies exclusive use of their phone lines, freeing them from having to share them with independent Internet services such as Earthlink.

When one Internet company challenged the move, the case went all the way to the Supreme Court, which upheld the FCC's position that Internet providers were "information services," not "communication services," and didn't have to ensure competition.

The ruling led to the current battle over net neutrality, as the major telcos want to roll out high-speed "triple play" products that combine voice, phone, and Internet access in one, along with special subscription television programming, in order to compete with cable companies.

Supporters of net neutrality fear that Internet content providers such as Google, YouTube, MySpace may be charged extra fees to ensure timely delivery of their services. Major sites already pay millions of dollars for Internet bandwidth.

The FCC recently challenged BellSouth and Verizon over the issue of mysterious new fees they were charging consumers. Both companies had recently won relief from having to pay into the Universal Service Fund (USF), designed to fund broadband and other telecom development in low-income and rural parts of the country.

But rather than lower their prices on their DSL offerings to consumers, the telcos started charging "regulatory cost recovery fees" which almost precisely matched the old USF fees. The move set off a firestorm from angry subscribers and consumer groups, leading the FCC to threaten an inquiry. Both companies quickly backed off, at least for now.

The FCC's move came as a surprise to observers, given its generally pro-telco environment under Martin. Some observers suggested the fee issue might be revisited after the upcoming elections. Some said that Martin's move was designed to keep the rapacious natures of the telcos in check temporarily, so as not to endanger the massive mega-merger of Ma Bell's offspring.

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