Federal Communications Commission Chairman Kevin J. Martin yesterday proposed approving the acquisitions of AT&T Corp. and MCI Inc. without requiring asset sales, sources familiar with the matter said.
Martin's stance amounts to an opening negotiating position before talks with the three other commissioners over whether to approve SBC Communications Inc.'s $16 billion purchase of AT&T and Verizon Communications Inc.'s $8.5 billion merger with MCI.
The mergers must also be cleared by the Justice Department, which is reviewing them on antitrust grounds and which usually announces its views before the FCC acts.
The position adopted by Martin may run into resistance among the other commissioners, particularly over the issue of whether the companies should sell off some special access lines to lucrative business customers. Critics say the acquisitions will eliminate the two biggest players in the market for such lines, allowing SBC and Verizon to raise prices for smaller competitors who lease them.
Another issue likely to be raised over the mergers is whether Verizon and SBC should be required to sell stand-alone DSL Internet service to residential customers without requiring them to purchase local telephone service. That would allow residential customers to get their phone service from Internet phone companies, providing competition to firms like SBC and Verizon and potentially holding down prices.
Not requiring asset sales as a condition of the mergers "would be a devastating blow to competition," said Gene Kimmelman, director of the Washington office of Consumers Union.
"SBC in its region and Verizon in its region would be the dominant local, long distance, broadband and wireless providers, able to inflate prices and control access to the most likely competition, which would be VoIP over high-speed DSL connections," Kimmelman said.
"These comments are hopelessly mired in the past and betray a fundamental misunderstanding of the competitive marketplace," said David M. Fish, a Verizon spokesman. "The world has changed, and Verizon and MCI are adapting to that change. This combination creates a new player better able to compete, invest in critical infrastructure and provide next-generation services to consumers."
The commission could vote on Martin's draft orders as soon as Oct. 28, when it next holds an open meeting. Politically, the FCC is split, with two Republicans -- including Martin -- and two Democrats. Martin needs two votes in addition to his own to clear the deals.
Separately, Verizon's planned purchase of MCI was approved by the Virginia State Corporation Commission. However, the state commission said it would require MCI to keep offering some wholesale services at pre-merger rates to ensure that consumers, and particularly mid-size businesses, do not suffer price hikes. The deal also received approval yesterday from European Union regulators, who found overlaps between the two companies in European Internet connectivity markets were "very limited."