FCC Approves Telco Mergers

Despite approval, Democratic commissioners do not believe all the conditions are necessary and caution against market concentration.

The Federal Communications Commission on Monday ordered several requirements to protect competition following Verizon Communications Inc.s planned purchase of MCI Inc. and SBC Communications Inc.s planned purchase of AT&T Corp.

The Bell companies must provide standalone DSL service for two years, retain the rates they charge businesses for high-capacity communications for two years and continue to provide "peering" with other Internet service providers for three years.

The companies are in such a hurry to complete their acquisitions of the two largest long distance carriers, that they volunteered conditions which even the chairman of the FCC thinks are unnecessary.

Not one of the countrys four top officials in charge of telecommunications was entirely satisfied with the arrangement. FCC Chairman Kevin Martin said that divestiture conditions set forth by the Department of Justice last week adequately addressed concerns about market concentration.

"I do not believe that all of these conditions imposed today are necessary," Martin said. "In isolation, I think its clear, that we all would have done this differently."

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Nonetheless, the FCC chairman said, the mergers will spur the Bells to invest in fiber optic networks, encourage new and advanced services and create strong, global carriers.

However, Martins Democratic colleagues, Commissioners Michael Copps and Jonathan Adelstein, argued that the conditions may not go far enough to prevent the rising prices and diminishing choices that could result from industry consolidation.

Both noted that they had previously cautioned against the potential for reduced competition in objecting to earlier commission decisions.

"In a sense, these mergers can also be seen as an epitaph for the competition that many of us thought we would enjoy as a result of the Telecommunications Act of 1996," Copps said.

"Thanks in part to our actions, the wireline market became increasingly the province of the few. More than half of the wireless market came under the control of incumbent wireline providers."

The more concentrated the service providers become, the greater their ability to block IP routes, Copps warned:

"It may be that we are tacking back in time toward an era when concentrated power dictated what limited services we could and could not have and we had no recourse but to accept what was offered."

Commissioner Adelstein said that he also would have preferred additional and more rigorous safeguards for competition. The business market, in particular, will face fewer choices.

"For American business customers, these mega-combinations may present the greatest risks," Adelstein said.

"The Commission concludes that there is still a high level of concentration in the enterprise market in most areas of the country today."

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AT&T and MCI are two of the largest sources for business offerings, and their presence in the marketplace alone results in lower wholesale prices, Adelstein said.

To prevent anti-competitive pricing, more of the four carriers overlapping facilities should be divested than those set forth in the Justice Departments conditional settlement last week.

"I am not convinced that the relatively minor number of facilities where [Verizon and SBC] are required to lease high-capacity lines is sufficient by itself to remedy this significant loss of actual and potential competition," he said.

"The Department of Justices action leaves 99.9 percent of commercial buildings in SBC and Verizon territory wholly unprotected from the loss of competition that AT&T and MCI brought to bear."

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