Stalemate Keeps AT& T-BellSouth Merger Off of FCC's Agenda

By Alan Sipress
Washington Post Staff Writer
Friday, December 15, 2006

Federal Communications Commission Chairman Kevin J. Martin said yesterday he did not know how soon it would consider AT&T's proposed $86 billion acquisition of BellSouth after the deal was left off the agenda for Wednesday's meeting because of a continuing stalemate between the commission's Republican and Democratic members.

Martin, an advocate of the merger, told reporters he was "anxious" to set a date for the vote, which would create the country's largest provider of telephone, wireless and broadband services. AT&T and BellSouth have waited more than seven months for the commission to act despite Martin's efforts earlier this year to win quick approval of the transaction without conditions.

The FCC has repeatedly delayed voting on the merger in recent months because of a stalemate between Republican supporters of the deal and their Democratic counterparts, who want to impose safeguards meant to protect consumers and ensure competition within the industry.

One of the main obstacles is disagreement over whether to require a "net neutrality" condition that would bar AT&T from asking different Internet services to pay different prices for using its lines.

To break the deadlock on the five-member board, the FCC's general counsel ruled last week that the potential swing vote, Republican Commissioner Robert M. McDowell, could take part in the consideration despite his concerns of a conflict of interest. McDowell has so far refrained from participating in the commission's review of the proposed merger because he previously worked as senior vice president for Comptel, as association that lobbied on behalf of companies competing with AT&T and BellSouth.

The opinion from the general counsel, Samuel Feder, left open the option for McDowell to abstain. McDowell, a Virginia lawyer, has yet to say whether he will ultimately participate in the vote, and if does, where he might stand on the conditions under debate.

In a letter to Feder this month, AT&T and BellSouth senior executives said they would not object to McDowell's participation, suggesting this would shift the dynamic on the commission in their favor, despite his earlier lobbying work.

"Commissioner McDowell stated at his confirmation hearing that he will be 'a fair, judicious, impartial, thorough and thoughtful adjudicator, arbiter and policymaker' and that he will 'prejudge nothing,' and we take him at his word," wrote AT&T Senior Vice President Robert W. Quinn Jr. and BellSouth Vice President Jonathan Banks.

But Gigi B. Sohn, president of Public Knowledge, a public interest group in the District that has opposed efforts to approve the merger without conditions, said last week that McDowell's participation would compromise the FCC's integrity.

"It is unseemly to try to force the commissioner to violate the ethical constraints not only of the commission, but of the Virginia Bar as well," Sohn said. "A better solution would be for Chairman Martin to reconsider his opposition to the pro-competitive and pro-consumer merger conditions."

The proposed acquisition has dramatically increased in value since it was presented to the FCC because of rising stock prices. If approved, the merger would reunite much of the AT&T telecommunications empire broken apart by the federal government 22 years ago because of concerns over competition.

Despite Feder's intervention, it has become increasingly clear in recent days that the merger would likely not be ready for FCC action at its regular meeting Wednesday. Martin said last week it would be difficult for the commissioners to reach an agreement in time. Even if McDowell decides to weigh in, he might need several weeks to familiarize himself with the debate and read the extensive filings by the companies and their supporters and critics, industry analysts said.

Should a majority of commissioners come to an understanding on any conditions, the merger could still be added to the Wednesday agenda or taken up at separate special meeting. The FCC is also not legally required to vote on the deal in public and could approve the acquisition without meeting at all.

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