AT&T Gets DOJ Approval on BellSouth Buyout

By LARA JAKES JORDAN, Associated Press Writer

AT&T's $78.5 billion buyout of BellSouth Corp. won Justice Department approval Wednesday, a decision that sets the stage for further reuniting modernized parts of the old Ma Bell phone monopoly broken up by the government in 1984.

The Justice Department approved the deal without conditions, which leaves the Federal Communications Commission as the final hurdle to the merger creating the nation's biggest provider of phone, wireless and broadband Internet services.

The decision was immediately criticized by the FCC's two Democratic members Jonathan S. Adelstein and Michael Copps, who characterized it as "a reckless abandonment of DoJ's responsibility" to protect consumers and smaller businesses.

Copps called it a "lights-off" decision.

Said Adelstein: "By failing to issue a complaint, consent decree, or condition, it appears DoJ took a dive on one of the largest mergers in history just to avoid further court scrutiny."

The FCC is scheduled to vote on the matter Thursday, though there's been speculation the agency may hold off because of a possible deadlock. In addition, members of Congress have raised questions about the deal's possible impact on market competition.

If the deal wins final government approval, the merger would give San Antonio-based AT&T Inc. total control over the nation's largest cellular provider, Cingular Wireless, a joint venture of the two phone companies that serves 57.3 million customers.

"After thoroughly investigating AT&T's proposed acquisition of BellSouth, the Antitrust Division determined that the proposed transaction is not likely to reduce competition substantially," said Assistant Attorney General Thomas O. Barnett, who heads the division.

The department's unconditional approval "underscores the competitive nature of our industry and the pro-competitive benefits of this merger," AT&T General Counsel James D. Ellis said in a statement.

BellSouth said, "We look forward to getting approval from the Federal Communications Commission in the very near future."

Critics claime the government is well on its way to reconstituting the old Ma Bell monopoly, which was broken up after a lengthy court battle.

The House Judiciary Committee's chairman, Rep. James Sensenbrenner, R-Wis., and other members of Congress had asked that the deal be held up until details related to two previous telecommunications mergers are settled and other concerns are addressed.

A coalition of consumer groups issued a statement condemning the Justice Department, saying the merger is "likely to leave consumers with fewer choices and inflated prices for a host of services."

The Bush administration "has surrendered the rights of the public to have a competitive and democratic broadband media system," said Jeffrey Chester, executive director of the Center for Digital Democracy. "The public should be alarmed about a handful of broadband giants controlling much of the U.S. digital distribution system."

DoJ's Barnett said Justice Department lawyers looked at all areas where AT&T and BellSouth currently compete, including local and long distance phone and Internet service for residential and business customers. It also examined the merger's impact on future competition for wireless broadband service.

Justice Department lawyers concluded that with other competitors in the marketplace, combined with changing regulatory rules and new emerging technology, the merger was unlikely to hurt consumers, Barnett said.

Instead, he said, the merger "would likely result in cost savings and other efficiencies that should benefit consumers."

The outcome at the FCC was far from certain. Republican Chairman Kevin Martin circulated an order recommending approval of the merger last month and probably will receive support from fellow Republican commissioner Deborah Taylor Tate.

With Adelstein and another Democrat, Michael Copps, criticizing the merger and Robert McDowell, the third Republican on the commission, prepared to recuse himself because he once lobbied on behalf of communications firms, Thursday's vote could result in a 2-2 deadlock. Historically, in that type of situation, the item is pulled from the FCC's meeting agenda until a compromise can be reached.

"In this largest of all telecom mergers, why wasn't the Department of Justice able to suggest one safeguard for protecting consumers and ensuring a competitive marketplace?" Copps said. "With the lights off at the Justice Department, it becomes all the more important for the FCC to ensure that consumer interests have a seat at the table."

The merger of San Antonio-based AT&T and Atlanta-based BellSouth would create a company of 300,000 employees with operations in 22 states. AT&T estimates that about 10,000 redundant jobs would be phased out over three years.

The Justice Department decision came just seven months after AT&T announced its intentions to buy BellSouth ? a breakneck pace for a merger of its size and scope.

Combined, the companies generate $117 billion in revenue, operate 68.7 million local phone lines across 22 states stretching coast to coast across the southern United States and up through the Midwest. The merged company would employ 309,000 people, though AT&T said it plans to eliminate up to 10,000 jobs over three years to cut costs.

The deal will further the reunification of the Baby Bells, the seven regional telephone operators and one long-distance provider that were spun off from the national AT&T monopoly under a federal court order designed to introduce competition.

Including BellSouth, the new AT&T would consist of four Baby Bells and the long-distance business, which was acquired by the company late last year. The other two Bells are Verizon Communications Inc., which dominates the eastern United States, and Qwest Communications International Inc., the phone company for most of the Rocky Mountain and Northwest regions.

Contributing to this report were Associated Press writers John Dunbar in Washington, Bruce Meyerson in New York and Harry Weber in Atlanta.

Copyright 2006 The Associated Press.

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[TELECOM Digest Editor's Note: So it would appear the 21st-century reincarnation of Ma Bell is now mostly complete, following this sellout by DOJ and FCC. I wonder if FCC can be counted on to make any effort at all to protect telephone customers? Probably not. PAT]

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Lara Jakes Jordan, AP
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