AT&T Not Inclined to Offer More Merger Conditions, Quinn Says

“Washington works because people can find reasonable ways to compromise and these conditions are a reasonable compromise,” Quinn said at a news briefing. The merger offers public benefits similar to those of the SBC-AT&T merger last year, except this one adds another benefit: It will bring video service to BellSouth’s customers, he said. Quinn hedged a bit on his pledge to stick with the current conditions: “We're not shutting the door on any clarifications to what we put on the public record [but the current conditions] form the framework for what we're going to end up with.”

Quinn was in meetings at the FCC 5-6 hours a day last week, he said, characterizing the sessions not as negotiations but as “discussions” in which commissioners’ staffs ask for more explanation of AT&T’s conditions. The company isn’t getting much “feedback” from FCC staff on the views of their bosses, he said. The conditions offered by AT&T included many from the SBC-AT&T merger last year, plus a few new ones -- for example, several aimed at making broadband service more accessible.

The “bottom line is, we need 3 votes,” said Quinn in what appeared to be a departure from his frequent comment last week that he wanted a unanimous vote from the 4 commissioners voting on the merger. FCC Comr. McDowell is sitting out the proceeding because of his former ties to CompTel, an opponent of the AT&T-BellSouth merger. The other 2 Republicans have appeared more favorable to the merger than the 2 Democrats. Asked if AT&T is “frustrated” that McDowell, a Republican, wasn’t participating, Quinn said he didn’t think McDowell would be biased in reviewing the merger and speculated his recusal might be “revisited” if the Commission hits an impasse. But McDowell would need time to get up to speed on the issues and AT&T wants the merger approved as soon as possible “for the sake of our shareholders.” Analysts equate delay with uncertainty, he said: “I'm interested in expeditious approval.”

Stifel Nicolaus analysts predicted the merger would be approved by the FCC “sometime in November (or possibly early December).” The Commission will attach conditions from the SBC-AT&T merger “extended in reach and duration, accompanied by some new conditions, including a few that go beyond” the recent AT&T-BellSouth offer, the analysts predicted in a report issued Fri. The key issues will be net neutrality and special access, as discussions intensify at the agency, the report said. “While we think the Democrats will press for a basic nondiscrimination requirement sought by network neutrality advocates, we don’t think AT&T will agree to it, given its general stance, the potential business and legal complications and the fact that it would be the only company so constrained,” said Stifel Nicolaus.

“Normally, we would say there is a strong chance that the deal would be approved at the scheduled Nov. 3 meeting or thereabouts on a bipartisan 4-0 vote with conditions similar to, and maybe slightly stronger than, those imposed on the AT&T-SBC deal last year,” the report said. But without McDowell’s participation, “the two Democrats have the power to block the deal if Chairman Martin and/or AT&T-BellSouth don’t meet their demands.” The situation will change if McDowell is pressed into service, Stifel Nicolaus said: “While Mr. McDowell has vowed to be impartial and has not opined on the merger, we suspect it would be difficult for him to break fundamentally with Chairman Martin and side with the Democrats in favor of heavier regulation, though he could seek his own compromise.”

McDowell didn’t comment Fri. on participation in the merger review. He has indicated that his job as CompTel’s gen. counsel might raise questions about it. McDowell is a member of the Va. Bar, which prohibits lawyers from acting on issues as public officials that they were involved with when they were in private practice.

More proposed conditions undoubtedly will appear when parties comment on AT&T’s package in filings due Tues., Quinn said: “The Christmas tree is up and it’s time to hang the ornaments.” The Commission’s job is to make sure mergers are in the public interest, not “to give gifts to people,” Quinn said.

Answering a reporter’s question, Quinn said AT&T can’t act on the requests by cable-based VoIP providers for interconnection rights without regulatory intervention. Cable companies “want to be treated as telecommunications providers but I can’t confer that jurisdiction on them,” Quinn said. “I can’t tell state regulatory commissions they have to start arbitrating that debate.”

Quinn dismissed calls for divesting spectrum BellSouth is planning to use for future WiMAX service (see separate story). “We haven’t put that on the table,” he said. WiMAX equipment is just starting to come into the market and as it does, the combined company will be offering trials, he said: “We have every incentive to roll these [services] out.”