FCC Approves AT&T-BellSouth Deal

FCC APPROVES AT&T-BELL SOUTH DEAL
[SOURCE: Wall Street Journal, AUTHOR: Amol Sharma amol.sharma@wsj.com and Corey Boles]
The Federal Communications Commission approved AT&T Inc.'s $85 billion takeover of BellSouth Corp. Friday, after the telecom giant offered a series of major concessions to consumer groups and regulators. The agency approved the deal, the largest ever in U.S. telecommunications history, by a unanimous 4-0 vote. The merger creates a behemoth that will have a market capitalization of over $220 billion -- more than double that of nearest rival Verizon Communications Inc. -- and will serve over 70 million local phone customers in 22 states, as well as 10 million broadband users. Approval of the deal was never in serious doubt, but it was held up for months because of objections from consumer groups and Democrats. AT&T broke the logjam by proposing a series of conditions this week that won over the Democrats, including a pledge not to prioritize any Internet content provider's traffic over another's, a principle known as "net neutrality." Lawmakers, consumer activists and some Internet companies said that without such regulation, AT&T would be able to strike deals guaranteeing Internet companies like Google Inc. higher quality or faster transmissions than other providers. The net neutrality condition applies to the portion of AT&T's network that connects consumers' homes to the Internet backbone. Special data and voice networks used by corporate customers would not be subject to the rules and AT&T's own nascent video offerings would also be exempted. AT&T also agreed to lower rates for some high-volume voice and data lines that serve corporate customers and are leased on a wholesale basis to smaller telecom carriers. And it pledged to offer stand-alone high-speed Internet access for up to $20 a month. Companies that offer Internet phone service, like Vonage Holdings Corp., would stand to gain if consumers don't have to buy their phone service and Internet service in a packaged bundle.
http://online.wsj.com/article/SB116740994686562601.html?mod=djemalert
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* FCC approves AT&T's buyout of BellSouth
http://www.usatoday.com/money/industries/telecom/2006-12-28-att-bellsout...

FCC Documents

* FCC Approves Merger of AT&T Inc. and BellSouth Corp.
News Release: http://www.fcc.gov/ATT-BellSouth_Press_Release.pdf
* AT&T Files Additional Proposed Merger Commitments
http://www.fcc.gov/ATT_FINALMergerCommitments12-28.pdf

* Chairman Martin and Commissioner Tate: "[W]hile the Democrat Commissioners may have extracted concessions from AT&T, they in no way bind future Commission action. Specifically, a minority of Commissioners cannot alter Commission precedent or bind future Commission decisions, policies, actions, or rules. Thus, to the extent that AT&T has, as a business matter, determined to take certain actions, they are allowed to do so. There are certain conditions, however, that are not self-effectuating or cannot be accomplished by AT&T alone. To the extent Commission action is required to effectuate these conditions as a policy going forward, we specifically do not support those aspects of the conditions and will oppose such policies going forward."
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-269275A2.doc

* Commissioner Copps: "We celebrate today not a triumph for huge corporate mergers but a modest victory for American consumers."
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-269275A3.doc

* Commissioner: Adelstein: "This transaction has given me serious pause, but through hard work and genuine compromise, we were able to achieve a result that delivers major, tangible benefits to consumers. A historic merger warrants historic conditions. I don't pretend that we addressed every possible issue presented here or that it is possible, or even appropriate in this context, to try to rectify years of decisions that have undercut competition. Yet, drawing on the full record, I have tried to counter-balance the effects of this transaction by asking for meaningful conditions that protect the open and neutral character of the Internet, benefit consumers by promoting affordable broadband services, and preserve competitive choices for residential and business consumers."
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-269275A4.doc

More Coverage

Ma Bell is calling again, with a big voice
[SOURCE: Los Angeles Times 12/26, AUTHOR: James S. Granelli]
More than 22 years after the federal government broke up the AT&T phone monopoly, Ma Bell's family is getting back together. With its $84.5-billion plan to buy BellSouth Corp., AT&T Inc. stands poised to reassemble much of the old network that controlled how America communicated. AT&T would end up managing more than a third of the nation's land lines and dominating local service in California and 21 other states. It would hold 23% of the broadband Internet market, leave nearly 95% of the offices in major cities without real choice in service and run the nation's largest cellular carrier, Cingular Wireless. That makes consumer advocates and some industry analysts ask: How big is too big? AT&T's political might already is unrivaled in its sphere. In the last eight years, it has contributed more to federal politicians and spent more on lobbying than the entire cable and satellite TV industries combined — and more than any communications, media or technology company, according to the Center for Public Integrity. "They wield a very significant amount of political influence because of their nationwide reach and their large number of employees," said Washington lawyer Philip L. Verveer, who was the Justice Department's first lead trial lawyer in the case that broke up the Ma Bell monopoly. "And because of that, they can play regulatory authorities off each other."
http://www.latimes.com/business/la-fi-att26dec26,1,1147356.story?coll=la...
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AT&T compromise may get merger approved
[SOURCE: Associated Press, AUTHOR: John Dunbar]
AT&T has offered a new set of concessions that are expected to satisfy the two Democrats on the Federal Communications Commission and lead to approval of the company's $85 billion buyout of BellSouth. AT&T filed a letter of commitment with the agency Thursday night that adds a number of new conditions to the deal, including a promise to observe "network neutrality" principles, an offer of affordable stand-alone digital subscriber line service and a promise to give up some wireless spectrum. AT&T offered the concessions after a little more than a week of marathon negotiations with lawyers who work for the two Democrats on the commission, Michael Copps and Jonathan Adelstein, documents show. The agreement came together 10 days after Republican Commissioner Robert McDowell announced that he would not vote on the deal, despite being authorized to do so by the FCC's general counsel.
http://www.chron.com/disp/story.mpl/ap/business/4432046.html

Groups Praise FCC Dems Over 'Net Gain
[SOURCE: Broadcasting&Cable 12/28, AUTHOR: John Eggerton]
http://www.broadcastingcable.com/article/CA6403072?title=Article&spacede...

* Media reformers, telecom workers union put positive spin on AT&T/BellSouth deal
[SOURCE: Lasar's Letter on the FCC, AUTHOR: Matthew Lasar]
http://www.lasarletter.net/drupal/node/273

* AT&T Deal May Affect Net Neutrality Debate
[SOURCE: Technology Daily, AUTHOR: Andrew Noyes]
http://www.njtelecomupdate.com/lenya/telco/live/tb-JBGR1167769276572.html

AT&T-BELLSOUTH DEAL CALLED 'BREAKTHROUGH' FOR CONSUMERS
[SOURCE: USAToday, AUTHOR: Leslie Cauley]
The Federal Communications Commission's handling of the $85 billion AT&T-BellSouth merger sets a "new baseline" for protecting the interests of consumers, FCC Commissioner Jonathan Adelstein said in an interview over the weekend. The FCC's approval of the merger on Friday allowed the deal to close immediately. To secure the FCC's blessing, AT&T agreed to a list of consumer-friendly concessions. Among them: For the next 30 months, AT&T agreed to sell "naked" DSL -- meaning consumers don't have to buy any other service from AT&T to get the DSL service — for just $19.95 a month. That's less than half the $44.95 that AT&T now charges. AT&T also agreed to a "net neutrality" provision that will require the company to treat all broadband services, its own as well as rivals', equally for the next two years. That means AT&T can't favor its own traffic, in terms of transmission speed and quality. In addition, AT&T agreed to sell some unused wireless spectrum. That could enable a new rival to enter the market, creating more options for consumers. Commissioner Adelstein called the settlement a "breakthrough" for consumers in that it establishes a new standard of behavior for the USA's communications giants. Big companies such as AT&T and Comcast "have told the FCC that they can't live with a net neutrality provision in place," Adelstein said. "They can." The fact that AT&T agreed to such an aggressive net neutrality clause proves that, he said. Though the settlement applies only to AT&T, other companies will be hard-pressed to ignore it, says Gene Kimmelman, public policy director of Consumers Union. "There will be enormous scrutiny of any company that does not live by these standards." The concession on naked DSL is significant, Kimmelman says, because it will permit consumers to buy DSL and phone services from different companies without being financially penalized. Right now, he notes, AT&T charges as much for naked DSL as it does for DSL and phone combined.
http://www.usatoday.com/printedition/money/20070102/fcc02.art.htm

AT&T PLANS PUSH IN WIRELESS, ADS
[SOURCE: Wall Street Journal, AUTHOR: Amol Sharma amol.sharma@wsj.com and Almar Latour ]
AT&T which became the world's largest telecom company by closing the $86 billion acquisition of BellSouth, will aggressively push new wireless services to corporate customers and consumers, and make advertising a key revenue stream, according to Chairman and Chief Executive Edward E. Whitacre Jr. With full control of cellphone operator Cingular Wireless, formerly a joint-venture with BellSouth, the San Antonio-based phone company will begin selling AT&T-branded wireless services to its large pool of corporate phone and Internet customers, allowing it to offer discounts for bundles that were impossible when Cingular was a separate entity. AT&T also will begin selling advertising on cellphones, television and its Internet-access service this year, allowing advertisers to reach consumers across multiple platforms with a single operator. Advertisers will be able to buy spots for TV and broadband beginning early this year, with wireless ads following suit later this year. The advertising business could generate several billion dollars in revenue per year in the next five years, the company says. AT&T is embarking on its wireless push after a year in which its shares rose 46% as investors applauded two years of deal making, including the acquisitions of BellSouth, AT&T Wireless and the former AT&T Corp. Analysts expect industry consolidation to continue, particularly among smaller regional wireless carriers. AT&T now has 58.7 million wireless customers, 67.5 million local-phone customers as well as corporate accounts with all of the Fortune 1000 companies. In addition to wireless and advertising, its other key growth engines in coming years will be its nascent Internet-based television service as well as overseas operations, particular among corporate customers.
http://online.wsj.com/article/SB116769013548264242.html?mod=todays_us_pa...
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INDUSTRY BRACES FOR NET NEUTRALITY FALLOUT
[SOURCE: Wall Street Journal, AUTHOR: Amy Schatz Amy.Schatz@wsj.com]
AT&T's capitulation on the issue of "net neutrality," which led U.S. regulators to approve its $86 billion purchase of BellSouth, may have consequences far beyond the company. Supporters of net-neutrality rules, which require equal treatment of all traffic from the Internet backbone to a consumer's PC, say AT&T's agreement provides a template for future legislation and may at least temporarily hinder hopes of other telecom and cable companies from monetizing their Internet lines by charging companies such as Google or Amazon.com to give their traffic priority and faster service. The net-neutrality condition expires in two years. The FCC specifically exempted AT&T's Cingular wireless business and the portion of its network dedicated to providing its Internet television service from the conditions. Other telecom companies aren't required to abide by the conditions agreed to by AT&T, but many may feel compelled to do so because of the public backlash they would face by ignoring them. FCC Chairman Kevin Martin doesn't believe net-neutrality rules are necessary because there hasn't been evidence of problems, and he has enough votes among his Republican colleagues on the five-member board to block them. On Friday, he offered a rebuke to the FCC's two Democrats, calling the net-neutrality conditions they extracted from AT&T "unnecessary" and "discriminatory." He stopped just short of vowing that no new industrywide net-neutrality rule would pass under his watch.
http://online.wsj.com/article/SB116768394926464050.html?mod=todays_us_pa...
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Commentary

Late Holiday Gift: AT&T Agrees Not to Take Away Our Internet - Temporarily
[SOURCE: Huffington Post, AUTHOR: Jonathan Rintels]
[Commentary] Late Thursday night, with an end-of-year deadline looming to get Federal Communications Commission approval of its takeover of BellSouth, AT&T agreed to significant conditions on the deal that will keep control of the public's Internet in the hands of the public, and out of AT&T's clutches -- at least, temporarily. Given that the US Justice Department abdicated the public interest and turned a blind eye to the glaring anti-competitive impacts of combining AT&T and BellSouth, two of the nation's largest phone companies, there was little chance this merger could be stopped entirely. So AT&T's cave in on Network Neutrality, its reluctant agreement to provide system-wide low cost stand-alone broadband access, its surrender of valuable spectrum to competitors, and other competition-preserving conditions - all in all, this is likely the best outcome the public could hope for. Yet, the Net Neutrality and other conditions in this merger are not permanent, but expire after, in most instances, 30 months. Thus, the battle now shifts to Congress to make these conditions permanent, and preserve control of the Internet in the hands of the public, not the big telephone and cable monopolists.
http://www.huffingtonpost.com/jonathan-rintels/late-holiday-gift-att-_b_...

AT&T Net Neutrality Condition: Win, Lose or Draw?
[SOURCE: Tales from the Sausage Factory, AUTHOR: Harold Feld]
[Commentary] Unsurprisingly, in an area as complex as this, opinion has split on what the merger conditions mean. Some, like Tim Karr and Columbia Law Professor Tim Wu, and Matt Stoller hail the conditions as an important victory. Others, such as Cardozo Law Professor and ICANN Director Susan Crawford, Jeff Pulver, and Dave Burstein think AT&T has cleverly played us for dupes by giving us conditions with loopholes that render the conditions meaningless. While others, like Dave Isenberg, strike a middle ground. Others, pointing out that the conditions only last two years. Comments that we got “duped” or “sold out” or didn't accomplish squat irritates me somewhat. The people who broke their backs moving this are under no delusions about how much remains to be done. Would it really encourage a team that has just ground out a first down from fourth and ten to get boos from the crowd because they haven't won the game yet? While reasonable minds can differ on whether to put this ultimately in the win column, the lose column, or the draw column, I hope folks will give those who fought hard for what we got a due measure of respect and some indulgence of their celebrating the positives we did achieve. So yes, we need to study the possible flaws in this definition of network neutrality. We need to come storming out of the gate the first week of '07 to make sure every Senator and Representative knows this deal is not enough and we will not rest until real network neutrality protections become permanent law. And we need to redouble our efforts in state legislatures, where the telcos hope to advance their franchise “reform” agenda. But can we do it in a way that doesn't piss all over our accomplishments? Especially when, frankly, I think we have good cause to celebrate how '06 came out.
http://www.wetmachine.com/totsf/item/682

AT&T Commits to Net Neutrality and Low-Cost Internet
[SOURCE: Free Press, Consumers Union, Consumer Federation of America]
Ben Scott, Policy Director, Free Press: "This mega-merger can't be stopped, but Commissioners Copps and Adelstein stood firm in the face of intense pressure to ensure a fair deal for the public that would protect the neutral and open Internet. Making Net Neutrality a condition of the largest merger in telecommunications history would set an important precedent. It will be up to the new Congress to craft a forward-looking broadband policy that will bring the benefits of the Internet to all Americans. For free speech, democratic participation and economic innovation to thrive online, Net Neutrality must be the law."
http://www.freepress.net/press/release.php?id=195

NET DISCRIMINATION
[SOURCE: Wall Street Journal, AUTHOR: Editorial Staff]
[Commentary] The more important question in this episode is political: Have we been watching a return of the Old Democratic habit of using rhetoric about "equity" and "justice" as a front for carrying water for certain business interests over others? The one thing no one should be deceived about is that this ambush has anything to do with "consumers." Internet users will benefit most from the rapid rollout of broadband, which requires letting companies get a return on their investment. Net neutrality is all about imposing price controls that shake down one corporate player for the benefit of another.
http://online.wsj.com/article/SB116768329181264029.html?mod=todays_us_op...
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THE NET NEUTRALITY SPINNERS
[SOURCE: Broadcasting&Cable, AUTHOR: Larry Honig]
[Commentary] Internet politics creates peculiar alliances. The oddest yet may be Google and best pal Microsoft teaming up to fight off attempts by broadband pipe owners (like Comcast and Verizon) to charge certain heavy content suppliers (like Google and Microsoft) more to use their networks than other suppliers (like Comcast and Verizon). Instead of defending a frozen concept of neutral access, the FCC may better serve the public interest by letting network owners have their way, as long as the FCC also adds open spectrum. That would allow free Wi-Max, a more wide-ranging wireless Internet service than Wi-Fi, to more effectively compete with fast but pricey private wirelines, ensuring real net neutrality.
http://www.broadcastingcable.com/article/CA6403240.html?display=Opinion