FCC delays vote on AT&T plan to acquire BellSouth

The Associated Press

WASHINGTON -- The Federal Communications Commission delayed for a third time its vote on whether to let AT&T Inc. acquire BellSouth Corp., because it can't decide what conditions should be placed on the deal.

The vote was scheduled for today, but the agency sent a notice Thursday night saying the item had been removed from the agenda.

The FCC was working with AT&T in an attempt to reach a compromise that would avoid a 2-2 deadlock. The apparent standoff raises the possibility that the fifth and newest commissioner -- Robert McDowell, a Republican appointee who until now has taken no part in the proceeding -- may be pulled in to cast a tie-breaking vote.

The Antitrust Division of the Justice Department on Oct. 11 cleared the deal, valued at $83.4 billion at the close of trading Thursday, declaring there were no competitive concerns and opting not to require the combined company to divest any assets or make any other concessions.

The failure to attach conditions sparked a sharp response from the two Democratic commissioners, Michael Copps and Jonathan Adelstein, who accused the Justice Department of failing to protect consumers.

FCC Chairman Kevin Martin had scheduled the Friday vote after twice delaying the decision. The issue was pulled from the Oct. 12 agenda, and a special meeting to consider the acquisition on the 13th never convened when Copps and Adelstein asked for more time to consider last-minute concessions offered by AT&T.

Those concessions included $10-per-month Internet access in its service area, free modems, promises to temporarily freeze prices for competitors that use the company's networks and even a pledge to bring back some BellSouth jobs that were shipped overseas.

A consortium of consumer groups criticized the concessions as "short-term candy for a few instead of long-term lower prices and better choices for all consumers."

In a statement Thursday night, AT&T said it had offered "unprecedented conditions unrivaled by any other communications provider in a merger proceeding." The company blamed the delay on "self interest of commercial entities and their litany of unreasonable demands."

AT&T's acquisition of BellSouth is being called the largest telecommunications merger ever. The combined company would generate $117 billion in revenue, operate 68.7 million local phone lines across 22 states stretching coast to coast across the southern United States and up through the Midwest. The merged company would employ 309,000 people, though AT&T said it plans to eliminate up to 10,000 jobs over three years.

Consumer groups are asking for promises that AT&T not discriminate against certain kinds of Internet traffic, offer reasonably priced digital subscriber line service without requiring customers to buy a bundle of services and other concessions.

Consumer groups and competitors also want the FCC to force AT&T to divest unused wireless spectrum unless it plans to use it.

McDowell is a former lobbyist for COMPTEL, a trade association that opposes the merger.

Federal ethics regulations permit the agency's general counsel to clear McDowell to vote as long as the "interest of the government in the employee's participation" outweighs any concerns about the how the vote may affect the agency's integrity.

The rules also say that once cleared by the general counsel, an employee "may not thereafter disqualify himself from participation." However, nothing would prevent him from abstaining.

Blair Levin, who was chief of staff for former FCC Chairman Reed Hundt and now a telecommunications industry analyst for Stifel, Nicolaus & Company, Inc., predicted McDowell will be called on to vote if the stalemate continues.

"At some point in time -- and I think that time is quickly approaching -- the general counsel is entitled to declare a deadlock," he said.

Levin predicted that McDowell, despite the difficult position he is in, would not abstain.