TELECOM Digest OnLine - Sorted: It May Happen This Year; AT&T Offers New Concessions to Prompt Merger

It May Happen This Year; AT&T Offers New Concessions to Prompt Merger

John Dunbar, AP (
Fri, 29 Dec 2006 14:55:31 -0600

By JOHN DUNBAR, Associated Press Writer

While much of Washington enjoyed a holiday break, lawyers for AT&T
Inc. and the government worked marathon hours to forge an agreement
that would allow the company to complete its $85 billion purchase of
BellSouth Corp.

The proposed deal could lead to the largest telecommunications merger
in U.S. history.

AT&T on Thursday night put forth what is expected to be its last and
best offer, and it appeared it was good enough to lead to a vote on
the merger by the Federal Communications Commission as early as

AT&T has offered concessions beyond what it had promised in October,
including a significant pledge to observe standards regarding network
neutrality -- basically, equal treatment for all Internet traffic. This
issue appeared to be the biggest roadblock to a deal.

Among the other concessions were an offer of affordable stand-alone
digital subscriber line service and a pledge to "repatriate" 3,000
jobs that had been outsourced by BellSouth.

Final approval requires a vote of the commissioners. An open meeting is
not required; rules allow them to vote via computer.

AT&T offered the concessions after a little more than a week of marathon
negotiations with lawyers who work for the commission's two Democrats,
Michael Copps and Jonathan Adelstein, documents show.

Consumer advocates praised the compromise.

Gene Kimmelman, vice president of federal and international affairs
for Consumers Union, who has worked closely with the Democrats, said
AT&T's new concessions are "an enormous improvement from where we were
a month ago."

Ben Scott, legislative director for Free Press, a reform group that
has fought the merger, said the network neutrality provision was a
"big step forward for the supporters of an open Internet."

The agreement came together 10 days after Republican Commissioner
Robert McDowell announced he would not vote on the deal, despite being
authorized to do so by the FCC's general counsel.

McDowell had decided to recuse himself because of his former position
as a lobbyist for Comptel, a trade organization that opposes the

FCC Chairman Kevin Martin, a Republican, who supported approval of the
merger without conditions, had bet that McDowell would vote for the
deal following the legal opinion and break a 2-2 partisan deadlock.

But with McDowell's firm declaration that he would not vote, the
pressure shifted to AT&T, which had hoped to close the transaction by
the end of the year. The development put the two Democrats in a much
stronger position.

In an effort to get the merger approved, AT&T submitted a set of
concessions on Oct. 13, but the Democrats rejected them as

AT&T's letter of commitment, written by Robert W. Quinn Jr., the
company's senior vice president for regulatory affairs, noted that the
new concessions were "significantly more extensive than those
submitted on Oct. 13."

Among the promises made by the company:

_An offer of stand-alone, high-speed Internet service to customers in
its service area for $19.95 per month for a total of 30 months. The
"naked DSL (digital subscriber line)" offer would allow those who live
in AT&T and BellSouth's service areas to sign up for fast Internet
access without being required to buy a package of other services.

_A greater commitment to network neutrality, or nondiscrimination
involving Internet traffic. AT&T said it would "maintain a neutral
network and neutral routing in its wireline broadband Internet access
service" for two years.

_To freeze rates for "special access" customers, usually competitors
and large businesses that pay to connect directly to a regional phone
company's central office via a dedicated fiber optic line, for 48

_To "assign and/or transfer to an unaffiliated third party" all of its
2.5 GHZ spectrum currently licensed to BellSouth within one year of
the merger closing date.

_To "repatriate" 3,000 jobs that were outsourced by BellSouth outside
the U.S. by Dec. 31, 2008, with at least 200 of them to be located in
New Orleans.

The Justice Department on Oct. 11 approved creation of the new
telecommunications giant without conditions.

The combination of San Antonio-based AT&T and Atlanta-based BellSouth
would have operations in 22 states. AT&T estimates that about 10,000
jobs would be phased out over three years.

Copyright 2006 The Associated Press.

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