FCC fails to end impasse on AT&T; deal
AT&T; Inc. and BellSouth Corp. made their names in the phone business, but their proposed combination would create the nation’s largest high-speed Internet provider.
And that has created problems at the Federal Communications Commission, which Friday postponed for the third time in less than a month a vote on whether to approve AT&T;’s $81-billion purchase of BellSouth.
Commissioners are haggling over possible conditions that would keep the new company’s broadband powers in check.
AT&T; has proposed conditions to try to secure the commission’s approval. Among them: offering broadband service for as low as $10 a month, giving free DSL modems to customers now using dial-up service, and promising to install at least 30% of its new broadband lines in rural and low-income areas.
But the concessions haven’t been enough for the FCC’s two Democratic commissioners, Michael J. Copps and Jonathan S. Adelstein, who are pushing for more conditions, including an agreement by AT&T; not to create so-called high-speed toll lanes on its Internet lines that would give preferential treatment to certain content.
The commissioners’ opposition has created a stalemate on the five-member FCC because Republican Robert M. McDowell is sitting out the debate. He has recused himself because his former employer, Comptel, an association of smaller phone companies, opposes the AT&T; deal.
FCC Chairman Kevin J. Martin, a Republican, supports approving the combination without conditions, and his GOP colleague Deborah Taylor Tate is expected to vote with him.
“I think that we’re still pretty far apart, and I think the progress has slowed,” Martin told reporters Friday.
Talks will continue and analysts expect the deal ultimately to be approved. If the deadlock continues or if Copps and Adelstein push too hard, Martin could ask the FCC’s general counsel to force McDowell to participate, which could lead AT&T; to withdraw some of its proposed concessions.
Many groups oppose the deal, saying the new AT&T; would have too much power over high-speed Internet service in California and 21 other states. With the addition of BellSouth’s 3.3 million broadband subscribers, AT&T; would have about 11.5 million broadband customers, nudging ahead of Comcast Corp.’s 11 million, according to Leichtman Research Group.
“This is one of the key battles over the U.S. broadband future,” said Jeff Chester of the Center for Digital Democracy, a group that promotes an open Internet. He called AT&T;’s purchase a “digital land grab” that would reduce high-speed Internet options and drive up prices.
AT&T;, based in San Antonio, is already the country’s largest phone company. With the addition of Atlanta-based BellSouth, it would have about 70 million land-line phone customers and fully control the nation’s largest cellular provider, Cingular Wireless, which is a partnership between the two companies.
“Essentially it’s the next step toward the re-creation of Ma Bell,” said Gigi Sohn, president of Public Knowledge, a digital rights advocacy group that has joined a coalition of public interest organizations calling on the FCC to impose tougher conditions on the deal.
They want AT&T; to be prohibited from charging websites for higher-speed delivery of video and other data-heavy content, a politically charged issue known as “network neutrality.” Network neutrality, which has stalled telecommunications legislation in Congress, would make it easier for phone companies to offer TV service over their lines.
AT&T; maintains that merger conditions shouldn’t be used to address industry problems.
“If you’ve got industrywide issues, they should be solved in industrywide forums, not by putting conditions on individual competitors competing in the marketplace,” said Robert Quinn, senior vice president for federal regulatory affairs.
The Justice Department approved the merger last month with no conditions.
AT&T; has tried to address the concerns of Copps and Adelstein, who are proponents of network neutrality, by proposing ways to boost the number of people who get broadband service, Quinn said. A $10-a-month service as fast as 768 kilobits per second would cost 33% less than AT&T;’s lowest standard rate, he said.
The proposals have drawn support for the deal from liberal constituencies such as the National Assn. for the Advancement of Colored People and 26 House Democrats whose districts would be served by the new company.
Last month, Charles Steele, president of the Southern Christian Leadership Conference, a leading civil rights group, wrote to the FCC to urge the approval of the deal. “The longer we wait to deliver telecom services, especially to members of low-income communities, the deeper the digital divide becomes,” he said.
But Compton Mayor Eric J. Perrodin and the mayors of Detroit and New Orleans aren’t sold. They have asked the FCC to set timelines for AT&T; to extend broadband service to low-income areas of their cities.
Other groups have criticized AT&T; for offering the $10-a-month broadband service only to customers who buy its phone service, not setting a price for the stand-alone broadband it has also committed to offer, and failing to use its radio-wave spectrum to quickly roll out wireless broadband.
“The hollow promises of AT&T; ... shouldn’t be enough to move the commission,” Comptel President Earl Comstock said.
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