TELECOM Digest OnLine - Sorted: AT&T Gets DOJ Approval on BellSouth Buyout

AT&T Gets DOJ Approval on BellSouth Buyout

Lara Jakes Jordan, AP (
Wed, 11 Oct 2006 15:42:54 -0500

By LARA JAKES JORDAN, Associated Press Writer

AT&T's $78.5 billion buyout of BellSouth Corp. won Justice Department
approval Wednesday, a decision that sets the stage for further
reuniting modernized parts of the old Ma Bell phone monopoly broken up
by the government in 1984.

The Justice Department approved the deal without conditions, which
leaves the Federal Communications Commission as the final hurdle to
the merger creating the nation's biggest provider of phone, wireless
and broadband Internet services.

The decision was immediately criticized by the FCC's two Democratic
members Jonathan S. Adelstein and Michael Copps, who characterized it
as "a reckless abandonment of DoJ's responsibility" to protect
consumers and smaller businesses.

Copps called it a "lights-off" decision.

Said Adelstein: "By failing to issue a complaint, consent decree, or
condition, it appears DoJ took a dive on one of the largest mergers in
history just to avoid further court scrutiny."

The FCC is scheduled to vote on the matter Thursday, though there's
been speculation the agency may hold off because of a possible
deadlock. In addition, members of Congress have raised questions about
the deal's possible impact on market competition.

If the deal wins final government approval, the merger would give San
Antonio-based AT&T Inc. total control over the nation's largest
cellular provider, Cingular Wireless, a joint venture of the two phone
companies that serves 57.3 million customers.

"After thoroughly investigating AT&T's proposed acquisition of
BellSouth, the Antitrust Division determined that the proposed
transaction is not likely to reduce competition substantially," said
Assistant Attorney General Thomas O. Barnett, who heads the division.

The department's unconditional approval "underscores the competitive
nature of our industry and the pro-competitive benefits of this
merger," AT&T General Counsel James D. Ellis said in a statement.

BellSouth said, "We look forward to getting approval from the Federal
Communications Commission in the very near future."

Critics claime the government is well on its way to reconstituting the
old Ma Bell monopoly, which was broken up after a lengthy court

The House Judiciary Committee's chairman, Rep. James Sensenbrenner,
R-Wis., and other members of Congress had asked that the deal be held
up until details related to two previous telecommunications mergers
are settled and other concerns are addressed.

A coalition of consumer groups issued a statement condemning the
Justice Department, saying the merger is "likely to leave consumers
with fewer choices and inflated prices for a host of services."

The Bush administration "has surrendered the rights of the public to
have a competitive and democratic broadband media system," said
Jeffrey Chester, executive director of the Center for Digital
Democracy. "The public should be alarmed about a handful of broadband
giants controlling much of the U.S. digital distribution system."

DoJ's Barnett said Justice Department lawyers looked at all areas
where AT&T and BellSouth currently compete, including local and long
distance phone and Internet service for residential and business
customers. It also examined the merger's impact on future competition
for wireless broadband service.

Justice Department lawyers concluded that with other competitors in
the marketplace, combined with changing regulatory rules and new
emerging technology, the merger was unlikely to hurt consumers,
Barnett said.

Instead, he said, the merger "would likely result in cost savings and
other efficiencies that should benefit consumers."

The outcome at the FCC was far from certain. Republican Chairman Kevin
Martin circulated an order recommending approval of the merger last
month and probably will receive support from fellow Republican
commissioner Deborah Taylor Tate.

With Adelstein and another Democrat, Michael Copps, criticizing the
merger and Robert McDowell, the third Republican on the commission,
prepared to recuse himself because he once lobbied on behalf of
communications firms, Thursday's vote could result in a 2-2 deadlock.
Historically, in that type of situation, the item is pulled from the
FCC's meeting agenda until a compromise can be reached.

"In this largest of all telecom mergers, why wasn't the Department of
Justice able to suggest one safeguard for protecting consumers and
ensuring a competitive marketplace?" Copps said. "With the lights off
at the Justice Department, it becomes all the more important for the
FCC to ensure that consumer interests have a seat at the table."

The merger of San Antonio-based AT&T and Atlanta-based BellSouth would
create a company of 300,000 employees with operations in 22
states. AT&T estimates that about 10,000 redundant jobs would be
phased out over three years.

The Justice Department decision came just seven months after AT&T
announced its intentions to buy BellSouth a breakneck pace for a
merger of its size and scope.

Combined, the companies generate $117 billion in revenue, operate 68.7
million local phone lines across 22 states stretching coast to coast
across the southern United States and up through the Midwest. The
merged company would employ 309,000 people, though AT&T said it plans
to eliminate up to 10,000 jobs over three years to cut costs.

The deal will further the reunification of the Baby Bells, the seven
regional telephone operators and one long-distance provider that were
spun off from the national AT&T monopoly under a federal court order
designed to introduce competition.

Including BellSouth, the new AT&T would consist of four Baby Bells and
the long-distance business, which was acquired by the company late
last year. The other two Bells are Verizon Communications Inc., which
dominates the eastern United States, and Qwest Communications
International Inc., the phone company for most of the Rocky Mountain
and Northwest regions.

Contributing to this report were Associated Press writers John Dunbar in
Washington, Bruce Meyerson in New York and Harry Weber in Atlanta.

Copyright 2006 The Associated Press.

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[TELECOM Digest Editor's Note: So it would appear the 21st-century
reincarnation of Ma Bell is now mostly complete, following this
sellout by DOJ and FCC. I wonder if FCC can be counted on to make
any effort at all to protect telephone customers? Probably not. PAT]

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