FCC gives OK to telecom mergers

The Federal Communications Commission today approved the mergers of SBC Communications Inc. and AT&T Corp. and Verizon Communications Inc. and MCI Inc.

"The mergers will create stable, reliable, U.S.-owned companies that will provide service to government customers and benefit national defense and homeland security," the FCC said in a statement.

The regulatory agency also said that the deals will integrate complementary networks, increase service efficiency, provide customers with new services and improve network reliance. They also will increase the companies' incentives and resources for research and development, as well as yield substantial cost savings, the FCC said.

At the heart of the FCC commissioners' debate was whether the mergers were compatible with public interest and whether they would promote innovation and the growth of competition. On Friday, the four-member panel was split evenly with two for the mergers and two against.

The FCC attached certain enforceable provisions to the deals to address possible adverse affects to competition and consumers. The companies agreed to:
  • Not to seek an increase in state-approved rates for unbundled network elements for two years.

  • Implement a service-quality measurement plan to provide FCC with quarterly performance results for interstate special access service.

  • Not to increase for 30 months rates paid by existing in-region customers of AT&T in SBC's region or of MCI in Verizon's region for wholesale local-line service for certain digital signal levels.

  • Not to provide for 30 months special access services to themselves, their interexchange affiliates, each other or their affiliates that are not generally available to other customers.

  • Not to increase for 30 months rates set forth in SBC's and Verizon's interstate tariffs for special access services, including contract tariffs that they provide in their in-region territories.

  • Maintain for three years settlement-free peering arrangements with at least as many providers of Internet backbone services as they did in combination on the merger closing dates.

  • Provide within 12 months of the merger closing dates, digital subscriber line service to in-region customers without requiring them to also buy circuit-switched voice telephone service.

Some industry groups were unhappy with the approvals of the deals.

"We are extremely disappointed that the FCC leadership decided to allow the two largest Bell telephone companies to continue to reap excessive monopoly profits from its local private line services," said Brian Moir, a lawyer for the Ecommerce and Telecommunications Users Group. The Washington organization represented large end-users of information technologies.

The local private lines are used mainly for the transmission of data to and from hundreds of thousands of business locations, the group said in a statement.

The Justice Department approved both transactions last week. The companies expect to close their deals later this year or in early 2006.

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