MERGER: Baby Bell Seeks to Thwart AT&T;, McCaw : Baby Bell Seeks to Block AT&T;, McCaw : Communications: The FCC is urged to deny or modify the proposed $12.6-billion merger between the giants of long-distance and cellular.
Southwestern Bell Corp. said Tuesday it has filed a petition with the Federal Communications Commission to deny or impose conditions on AT&T;’s proposed merger with McCaw Cellular Communications Inc.
In August, AT&T;, the largest U.S. long-distance company, proposed to merge with McCaw, the largest U.S. cellular operator, in a transaction valued at $12.6 billion. Southwestern Bell and the six other regional Bell operating companies said at the time that if the merger was approved, they would demand greater freedom from current service restrictions.
The seven so-called Baby Bells said the merger would allow McCaw cellular customers to bypass the local phone companies’ networks and connect directly to AT&T;’s long-distance network, thus reducing the $15 billion a year that AT&T; pays local companies for access to their networks. In effect, it would let AT&T; offer local phone service, while current laws prohibit the Baby Bells from offering long-distance services.
“AT&T; is trying to retain an artificial competitive advantage--based upon the divestiture agreement which it negotiated--and to deprive customers of the benefits of full competition,” said Tom Barry, Southwestern Bell’s vice president for government relations.
“Such hypocrisy should not be tolerated,” the company said in its filing. “Certainly it should not be rewarded with a stacked regulatory deck that gives AT&T; an overwhelming and anti-competitive advantage in the wireless market.”
Southwestern Bell said the combined AT&T-McCaw; company would have control over 80% of the current long-distance wireless market, 40% of the U.S. market for wireless network equipment and software, and more than 2.3 million current McCaw wireless customers. The combined AT&T-McCaw; could also bundle long-distance and cellular services, a move that Southwestern Bell couldn’t match.
Under the breakup of AT&T; in 1984, the Baby Bells are restricted from manufacturing equipment and offering long-distance phone services.
The merger would also raise concerns about AT&T; as a manufacturer of equipment. AT&T; could raise equipment prices and discriminate against McCaw’s cellular competitors, such as Southwestern Bell, in installation and maintenance, Southwestern Bell said. As a cellular manufacturer, AT&T; could provide McCaw with competitive market information from Southwestern Bell’s cellular operations.
Last week, AT&T; said it believes the restrictions on the Bell companies should be lifted when the local phone market is “fully competitive.” AT&T; said that will occur when 75% of local phone customers in the Bell companies’ regions have an opportunity to choose an alternative carrier and at least 30% of those have chosen an alternative to the Bells.
The merger “is not an instance of AT&T; trying to enter the local exchange market,” an AT&T; spokesman said Tuesday. “More than 90% of cellular calls still go through the local exchange.”
In its petition, Southwestern Bell said the FCC could require AT&T; to provide wireless services through a separate unit, require equal access for inter-exchange service and establish a “series of safeguards” for AT&T; to prevent discrimination and unfair use of competitive information.
Southwestern Bell called AT&T;’s behavior “regulatory gamesmanship of the worst sort.”
Atlanta-based BellSouth Corp., another regional Bell operating company, also filed a complaint with the FCC on Tuesday. In its filing, BellSouth said the FCC should use the merger as a first step toward allowing the Baby Bells to compete for long-distance phone services. BellSouth also said the FCC should require AT&T; to give cellular customers access to other long-distance services, just as the Bells have to offer their cellular customers a choice between AT&T; and other long-distance carriers.
Yesterday was the final day for public comments on the proposed merger.
