FCC OKs Telecom Mergers with Internet Conditions
FCC approval of the SBC-AT&T and Verizon-MCI mergers imposes several Internet-focused conditions. The firms must maintain peering arrangements with at least as many Internet backbone providers as they do now and post peering policies on publicly accessible websites, including posting revisions “on a timely basis.” The firms also must also adhere to FCC net neutrality goals and provide stand-alone or “naked” DSL, the Commission said.
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The 2 mergers came under the same conditions, framed as “voluntary” agreements by the companies. Most conditions will apply for specific time periods, generally 30 months or 2 years, depending on what the companies proposed in talks with the Commission, an FCC official said. The FCC didn’t expand on Justice Dept. conditions aimed at easing the mergers’ competitive impact on office buildings wired by both Bells and their merger partners.
The ruling marked a compromise, with no Commissioners completely happy with the conditions, they said. FCC Chmn. Martin said commissioners “struggled to find a compromise,” since the Commission wanted to act as quickly as possible to avoid uncertainty in the telecom industry. Martin and Comr. Abernathy said they felt some conditions were unnecessary while Democratic Comrs. Adelstein and Copps wanted stronger conditions. Adelstein and Copps cast concurring votes.
The pluses “outweigh” any harm, FCC Wireline Bureau Chief Thomas Navin and other FCC staff members said in introducing the item at the FCC agenda meeting’s start. Among those pluses, according to staff: (1) Integrated networks will increase efficiency. (2) Larger U.S.-owned companies with financial strength will benefit national defense. (3) Serving a larger customer base with increased economies of scale will encourage research and development.
CompTel Pres. Earl Comstock called the FCC action a “rubber stamp approval” with conditions that “will not come close to addressing the anti-competitive harm that will be caused by the mergers.” Consumers Union and the Consumer Federation of America (CFA) voiced concern about the impact on residential consumers. A lack of “meaningful protections against pricing abuse means competitors can be squeezed out of the market and consumers face price increases,” said CFA Research Dir. Mark Cooper.
Verizon said its combined company will be better able to compete for and serve large business and govt. customers by providing a full range of services, including wireless and sophisticated IP-based services. Consumers and businesses also will benefit, since the new firm will have the financial strength to maintain and improve MCI’s extensive Internet backbone network, Verizon said.
EarthLink lauded the stand-alone DSL condition. It means more than 80 million consumers will be able to take advantage of emerging Internet voice and data applications without also having to buy legacy wireline local phone service, EarthLink Exec. Vp Chris Putala said. FCC enforcement of net neutrality “helps guarantee the rights of all consumers to access the Internet content and applications they choose,” Putala said. XO Communications Senior Vp-Govt. Relations Heather Gold said the decision helped ensure wholesale market competition.
Public Knowledge (PK) Pres. Gigi Sohn said she is pleased the FCC followed principles that “will allow consumers unlimited accessibility to the Internet.” Some consumers should benefit at least short term, since the conditions will make the net neutrality principle, among others, enforceable, she said. But Sohn said she is disappointed the firms must adhere to those principles only for 2 years, rather than as a permanent condition of the merger. That makes it imperative that Congress and other policymakers “act to ensure that all consumers, not only the customers of SBC and Verizon, will always have the right to access information, to use applications and to attach equipment of their choice to the network.” That’s one of PK’s chief policy proposals for an “open broadband future.”
The FCC action followed days of intense talks among the commissioners. They had planned to act in a public meeting Fri. but when agreement proved elusive postponed the session until Mon. Comr. Abernathy said she thought the conditions “focused too much on micromanagement,” don’t recognize market changes and could even harm potential synergies resulting from the merger. Comr. Copps called the conditions inadequate but said the order “is clearly better than approving the mergers without conditions.” Copps said the conditions are “the best we were able to achieve” and henceforth “the priority must be on vigilance” to make sure the firms adhere to the conditions.
While many details remain unclear, Legg Mason analysts’ general sense was the merging parties “largely succeeded in beating back the more onerous conditions urged by competitors and other merger critics.” The naked DSL condition could help VoIP providers and wireless carriers that want customers to leave traditional Bell service, but the fact that the FCC imposed no price regulations means the impact is limited, Legg Mason said. The peering provision benefits firms that seek, but have been denied, peering status. It’s likely the first time that the govt. has regulated the Internet backbone, Legg Mason said.