FCC Delays Merger Vote For AT& T, BellSouth
Inability to Agree On Concessions Puts Deal on Hold

By Alan Sipress
Washington Post Staff Writer
Saturday, October 14, 2006

The Federal Communications Commission yesterday delayed its vote on AT&T Inc.'s proposed acquisition of BellSouth Corp. for three weeks so the public has time to comment on proposals to break the stalemate between the board's Democratic and Republican members.

In a letter to Chairman Kevin J. Martin, AT&T yesterday outlined conditions it could accept to help win quick approval of the merger. They include technical provisions, focused in part on the availability of broadband Internet service and telephone lines and the prices customers are charged for using them.

But AT&T stopped short of accepting a "net neutrality" condition that would bar the company from asking different Internet services to pay different prices for using its lines.

The proposed acquisition, which has increased in value to $81 billion because of rising stock prices, would reunite much of the AT&T telecommunications empire broken up by the government 22 years ago. If the deal is approved, AT&T would be the country's largest provider of telephone, wireless and broadband services.

Martin, a Republican, had initially pressed for swift approval without conditions despite the desire of the commission's two Democratic members for more safeguards to protect consumers and ensure competition. But with the potential swing vote, Republican Commissioner Robert M. McDowell, sitting out the deliberations to avoid a conflict of interest, Martin turned to intense bargaining with the Democrats this week in a bid to win the majority required to approve the merger.

When the Democrats pressed for concessions from AT&T, Martin's office asked the company for its reaction to several conditions recently suggested by the public, according to an FCC source, who was not authorized to speak on the record. That prompted the company to prepare the letter detailing commitments it would be willing to make.

The FCC scheduled a public session for yesterday to consider the merger, but the negotiations produced no agreement and the commissioners never entered the meeting room.

Instead, after more than an hour, the two Democrats, Michael J. Copps and Jonathan S. Adelstein, sent a letter to Martin asking him to remove the acquisition from the agenda so that conditions discussed with AT&T could be aired in public.

"These proposals raise a number of significant questions and complex technical issues for us to consider. In light of these developments, we believe that the best way to advance the Commission's review is to open this process to public comment," the Democrats wrote. They said that could be completed on an "expeditious basis."

Nearly two hours after the Democrats released their letter, Martin responded with his own, agreeing to call an immediate 10-day public comment period on the proposals. He rescheduled the commission vote for Nov. 3.

"I share your desire to proceed on an expedited basis. To this end, to the extent that you have additional concerns, I trust that you extend us the courtesy of raising them as soon as possible to avoid any further delay in the consideration of this transaction," Martin wrote to the Democrats. He agreed that the recent discussions have been "constructive."