FCC OKs Mergers of Telecom Giants
Federal regulators approved the creation of two telecommunications giants Monday, putting its imprimatur on a major transformation in the industry.
The Federal Communications Commission cleared the way for SBC Communications Inc. to acquire AT&T; Corp. for $16 billion and for Verizon Communications Inc. to buy MCI Inc. for $8.5 billion.
Some competitors and consumer advocacy groups that opposed the unions were heartened by last-minute conditions that, for instance, require the combined companies to make high-speed Internet easier to obtain. And backers of the deals said they would enable new services to be rolled out more quickly.
SBC Chairman Edward E. Whitacre said the agency’s unanimous vote recognized that the merger would “enhance competition, help bring new technologies to market faster and provide real benefits to consumers and businesses.”
Said FCC Chairman Kevin J. Martin: “These mergers create strong global carriers that will vigorously compete both internationally and domestically.”
The commission’s two Democrats, though, insisted on conditions intended to promote competition.
AT&T;, as SBC will be known, and Verizon will be required to sell stand-alone high-speed Internet service. In addition, the two companies agreed not to interfere with competing online services that customers choose to use.
“The order the commission adopts today falls far short of ideal,” said Commissioner Michael J. Copps. “Yet, clearly, this is better than approving these mergers without any conditions.”
A little more than a month ago, Martin had given his three FCC colleagues drafts of proposed approvals that carried no significant conditions, raising the ire of consumers and competitors, said Christopher Putala, executive vice president for public policy at Internet service provider EarthLink Inc. in Atlanta.
Opponents found sympathetic ears in Copps and Commissioner Jonathan S. Adelstein, both of whom pressed for conditions that guaranteed some level of competition.
“Once the public gets used to the notion that they’re entitled to buy DSL without the carrier’s phone service, it’s going to be hard to put the genie back in the bottle,” Putala said.
The same consumer and political forces that helped shape the merger conditions, he said, should now turn their attention to Congress as lawmakers update the Telecommunications Act of 1996.
“Approval of these mergers undermines more than 20 years of efforts to introduce competition into the residential local and long-distance telecommunications market,” said Gene Kimmelman, public policy director at Consumers Union.
Verizon, which already offers stand-alone DSL, called the combination “undeniably in the public interest.”
Both Verizon and SBC are upgrading their networks to take super-fast fiber-optic lines to or near homes to deliver television programming. They look to the cable companies as their chief competitors.
After the mergers, Verizon would remain the nation’s largest telecom company, based on combined revenue last year of $92 billion. The new AT&T; would be the next largest with $71.3 billion. BellSouth Corp. would be third with $20.3 billion in sales last year.
The deals can be closed after the FCC issues a written order, expected this month, and California and several other states approve them.
