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from: Technology Daily

Lawmakers Hint At Conditions On AT&T-BellSouth Merger

By David Hatch

(Thursday, September 28) Two influential senators urged the FCC and Justice Department to consider imposing conditions on the proposed AT&T and BellSouth telecommunications merger.

In a letter to both agencies, Sens. Mike DeWine, R-Ohio, and Herb Kohl, D-Wis., said divestitures of company assets may be needed, along with curbs on the ability of the merged parties to "warehouse" spectrum, thus restricting it from competitors.

They also offered this warning: "The significant expansion in size and scope heralded by this merger makes it important for your agencies to be mindful of the general competition policy concern" of maintaining open markets.

Their proposals are at odds with last week's recommendation from Republican FCC Chairman Kevin Martin that no conditions be placed on the transaction, which would create the nation's largest telecom company.

Meanwhile, two House members -- Judiciary Committee Chairman James Sensenbrenner, R-Wis., and John Conyers of Michigan, the panel's top Democrat -- urged Justice to refrain from ruling on the merger until a court review of two previous telecom deals is complete. Under the so-called Tunney Act, the U.S. district court in Washington is automatically reviewing the MCI-Verizon Communications and AT&T-SBC Communications mergers.

In a Wednesday missive to Attorney General Alberto Gonzales, the congressmen said the outcome of that review could impact Justice's upcoming decision. "Any court decision in the pending Tunney Act proceedings would necessarily affect the department's review and analysis of the proposed AT&T-BellSouth merger," they explained.

If Justice heeds the lawmakers' request, the FCC's planned Oct. 12 ruling on the AT&T-BellSouth transaction might be delayed, an industry observer said. That is because Justice historically issues its merger decisions first. It is uncertain when the Tunney Act review will be completed.

DeWine, chairman of the Senate Judiciary Antitrust Subcommittee, and Kohl, the panel's top Democrat, noted in their letter that a merged AT&T-BellSouth would control substantial spectrum in the 2.3-gigahertz and 2.5-GHz bands. As a result, fewer frequencies would be available for competitors to offer high-speed, wireless Internet service with the WiMAX technology, they said.

Critics accuse the companies of planning to warehouse much of that spectrum, an allegation the companies strongly deny. The lawmakers urged both agencies to examine the impact of the merger on those airwaves and prospects for warehousing.

Regarding possible divestitures, the senators said spin-offs might be necessary in portions of BellSouth's territory where both companies serve business customers. In those locations, the deal might "diminish" competition, they warned. "The agencies should evaluate whether some remedy, including possible divestitures of these facilities, may be necessary to alleviate potential anticompetitive impacts in local markets," they wrote.

The blitzkrieg of criticism also included a letter from Kohl and Sen. Patrick Leahy of Vermont, the top Democrat on the Senate Judiciary Committee, to Justice complaining that the department routinely allows merging parties to close their deals before Tunney Act proceedings are finished. The lawmakers questioned whether that practice undermines court reviews.