The U.S. Federal Communications Commission's vote for the AT&T, Inc. and BellSouth Corporation merger was again delayed for the third time earlier this month.
San Antonio, Texas-based AT&T—formed after SBC Communications bought AT&T Corp.—already won approval for its merger plan with BellSouth, a Fortune 100 telecom company, by the antitrust division of the U.S. Department of Justice (DOJ) last month.
DOJ approved the merger without any roadblocks, frustrating some Democrats, including two FCC commissioners, Michael Copps and Jonathan Adelstein.
But, without the necessary FCC regulatory action, the merger cannot go forward.
The latest FCC move must have been known to a number of people, as just before the FCC took the AT&T-BellSouth agenda. Robert Hahn and Scott Wallsten, members of the AEI-Brookings Joint Center for Regulatory Studies announced in the article titled The AT&T –BellSouth Merger: The Real Story, "The proposed 80 billion dollar merger between AT&T and BellSouth, which was on the fast track, has suddenly hit a brick wall."
FCC Predicament
News reports and the Brookings article claim that FCC Chairman Kevin Martin is in favor of the merger, as well as Deborah Taylor Tate, a Republican commissioner, while Copps and Adelstein, the two Democrats, will not vote for the merger without major concessions.
The two dissenting commissioners request a thorough analysis into the merits of the mergers and want it clearly spelled out as to how consumers may be affected, especially any competitive losses that may result from this merger.
The third member of the Commission, Republican Robert McDowell, disqualified himself because of possible conflict of interest—he is a former employee of one of AT&T's competitors.
Rumors suggest that McDowell may still have to vote to break the deadlock and the merger may still be approved. McDowell's position on the deal has not been made public.
"The Commission finds itself deadlocked," said Hahn and Scott. "AT&T will need to offer concessions that will persuade at least one opposing commissioner to vote for the merger."
Media reports suggest that with this month's election wins by the Democrats, the AT&T-BellSouth merger maybe in trouble.
Consumer Groups against the Merger
Consumer groups, such as Consumers Union, headquartered in Yonkers, New York, and the Consumer Federation in Washington D.C., are up in arms and found AT&T's latest concessions a whitewash.
The latest concessions include no rate increase for existing tandem transit service arrangements and for existing customers of certain services.
The Consumers Union claims that wireless consumers living in America will face increased costs, as AT&T no longer has to compete with a major competitor—BellSouth.
Gene Kimmelman, Consumers Union senior director for public policy and advocacy, argues, "It doesn't make sense to expect the local phone company to compete against itself with its wireless product. Rather, it likely will raise prices for both local and wireless service, because it can control the market."
More importantly, this merger opens the door for Verizon Wireless to swallow the remaining wireless companies. "The merger sets a dangerous precedent," argues the Consumers Union in its press release.
Another argument against the merger alleges loss of "network neutrality." Josh Silver, executive director of the Free Press told Consumers Union, "Allowing this merger to proceed without meaningful protections for Net Neutrality would deal a mortal blow to the free and open in Internet as we know it." AT&T would be handed a free license to weaken existing "thriving competition…and consumers will have nowhere else to turn."
Scholars from the Washington D.C.-based think-tank Brookings Institute argued that this merger would take history back to before the break up of the old AT&T and a loss of the subsequent breakup benefits to society.
"The merger is clearly a backward step in the face of benefits to consumers from breaking up AT&T in 1984," a few months ago argue Brookings scholars.
AEI-Brookings Researchers Looks at the Merger Approval Process
While Hahn and Scott of AEI-Brookings can see the importance of the DOJ and FCC approval process, they do not believe that either government agencies understand the intricacies or have the technical background and business acumen to vote for or against telecommunications mergers.
Yet, these two researchers take exception to what they call the "Byzantine telecommunications merger approval process." Neither FCC nor DOJ are "sufficiently qualified to analyze telecom mergers."
They argue that a merger that DOJ considers beneficial to the consumer and gives its blessing, might turn out just the opposite. Yes, the FCC might impose conditions or stop the merger, but the question remains if the FCC is any more qualified than DOJ to review and vote on telecommunications mergers.
Hahn and Wallsten argue that it is most important to judge if the proposed merger would be detrimental or good for the consumer or society at large. They contend that the FCC or DOJ are constantly assaulted by lobbying activities, which more often than not have nothing to do with the actual merger.
The two researchers point to the 2000 AOL-Time Warner And the proposed Microsoft-Yahoo deal. At the time, lobbyists from consumer groups and competitors demanded that "messaging software [must be] compatible with everyone else's."
The AEI-Brookings Joint Center, located in Washington D.C., was formed in 1998 "to hold lawmakers and regulators accountable for their decisions by providing thoughtful, objective analyses of existing regulatory programs and new regulatory proposals."
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