Telecom merger approvals get mixed reviews

Organizations including a large-business telecommunications user group and two consumer groups complained that the FCC didn't go far enough Monday in imposing conditions on two giant telecommunications mergers.

Organizations including a large-business telecommunications user group and two consumer groups complained that the FCC didn't go far enough Monday in imposing conditions on two giant telecommunications mergers .

The mergers will result in higher telecom and broadband prices paid by business and residential consumers, said groups representing telecom customers. But other groups, including conservative think tanks, said the FCC went too far in requiring a number of conditions in SBC's acquisition of rival AT&T and Verizon's acquisition of rival MCI.

With the FCC's approval, only a handful of state approvals remain before the mergers can be completed.

The FCC on Monday approved the mergers asking for several "voluntary commitments" from the two merged companies. On the FCC's insistence, Verizon and SBC promised not to increase the rates they charge competitors to use parts of their networks for two years. The two companies also agree to not increase the rates their customers pay for wholesale, high-speed DS-1 and DS-3 lines for 30 months, and they agreed to offer competitors for 30 months the same network access rates they give themselves and their affiliates.

The FCC's insistence that Verizon and SBC offer DSL broadband service as a stand-alone product separate from traditional telephone service doesn't make sense, because the so-called naked DSL requirement doesn't affect any competitive concerns raised by the mergers, said Randy May, senior fellow at the conservative Progress and Freedom Foundation.

"None of the parties on either side of the merger generally was offering naked DSL before they got together, so, without a condition, there would be no less naked DSL offered after merger approval," May wrote on his Web log Monday.

Under the FCC merger approvals, naked DSL must be available within a year of each merger's closing. Advocates of the stand-alone DSL provision say it would allow competition from independent VoIP providers, which need broadband connections to offer voice service.

The Competitive Enterprise Institute, a free-market advocacy group, also complained about the conditions attached to the mergers, saying the FCC took a narrow view of telecom competition.

"Rapid developments in technology, along with an environment where cable, telephone, and wireless companies all compete against each other, will help ensure competition in the industry," Braden Cox, the group's technology counsel," said in a statement. "The conditions are unnecessary burdens to the potential gains these mergers create. Synergies delayed are consumer benefits denied.”

Among the organizations voicing disappointment over the FCC's approvals was the eCommerce & Telecommunications Users Group (eTUG), representing nearly 100 large-business, nonprofit and university customers of voice and data services. The U.S. Department of Justice Thursday announced it will require SBC and Verizon to divest fiber-optic network facilities in office buildings where the companies will have two lines into the building after the mergers, but neither the Justice Department nor the FCC addressed the majority of U.S. office buildings, where there's only one high-speed line owned by incumbent carriers such as Verizon and SBC, said Brian Moir, eTUG's general counsel.

"If you're the only game in town, and that's the vast majority of buildings, you and I would call that a monopoly," Moir said. "When [the incumbents] have no competitor in 90% to 95% of your locations, something's wrong here."

Moir's group had asked the FCC to force Verizon and SBC to cut rates for these high-speed special access lines into office buildings by more than 11%. The FCC allowed the incumbents' "bloated special access charges to continue to stifle American business investment and innovation," he said.

Two consumer groups, Consumers Union and the Consumer Federation of America, called the FCC action a "mixed bag." The conditions set by the FCC were "not nearly enough," the groups said in a press release. The two consumer groups also called for the U.S. Congress to step in and ensure telecom and broadband competition.

"Approval of these mergers undermines more than 20 years of efforts to introduce competition into the residential local and long distance telecommunications market," Gene Kimmelman, senior director of public policy for Consumers Union, said in a statement. "The FCC promises cross-technology competition with Internet phone service on cable and telephone systems, but the commission has failed to ensure that consumers will receive meaningful choices at fair prices."

Some media reports said Verizon was objecting to the stand-alone DSL portion of the FCC decision as an FCC meeting was delayed multiple times on Friday. But David Fish, a Verizon spokesman, disputed those reports. Earlier this year, Verizon officials said they were moving toward providing naked DSL service, and it's available in many areas, Fish said. Technology challenges, not Verizon's policies, have kept the company from rolling out naked DSL further, he said.

While the FCC action generated some complaints, other groups applauded its decision to approve the mergers with conditions. Advocacy groups the American Conservative Union, the Seniors Coalition, and RetireSafe all cheered the FCC for approving the mergers. The mergers will help keep prices down, ensuring that senior citizens access innovative telecommunications services, said the Seniors Coalition, an advocacy group advocating free-market choices for older U.S. residents.

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