CIO
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The U.S. Federal Communications Commission (FCC) on Monday approved two giant telecommunications mergers with conditions that include holding some rates steady and offering "naked" DSL (Digital Subscriber Line) broadband service.
With the FCC approvals, Verizon Communications Inc.’s acquisition of rival MCI Inc. and SBC Communications Inc.’s purchase of AT&T Corp. are ready to go forward pending approval from a handful of states. Last Thursday, the U.S. Department of Justice (DOJ) approved the mergers under the condition that the two merged companies divest fiber-optic network facilities in several major cities.
Among the conditions imposed by the FCC and accepted by the companies, the carriers committed to offer DSL without circuit-switched telephone service to subscribers within their coverage areas. They agreed to provide the service within 12 months of the closing of each merger, according to an FCC statement. The carriers also committed not to increase the rates for wholesale DS-1 and DS-3 local private line services paid by existing customers of AT&T in SBC’s regions or customers of MCI in Verizon’s regions. They also agreed, for three years, to maintain settlement-free peering arrangements with at least as many providers of Internet backbone services as they did on the closing dates of the mergers.
The FCC had originally been scheduled to take up the mergers in a Friday morning meeting, but the meeting was rescheduled three times that day before finally being switched to Monday. The commission, which should have five members, currently has two Republicans and two Democrats and an unfilled Republican seat, and commissioners reportedly couldn’t agree on conditions to include with the merger approvals.
All four commissioners agreed on Monday to let the mergers go forward. FCC Chairman Kevin Martin said the deals advance the agency’s goals for competition, greater broadband availability and public safety.
"It is my expectation that these mergers will only increase the incentive and ability of the merged entities to invest in broadband infrastructure and spread the deployment of advanced services to all Americans," Martin said in a written statement.
The concessions that the would-be mega-carriers made were small, said Frank Dzubeck, president of Washington, D.C., telecommunications consultancy Communications Network Architects Inc.
"There isn’t a board of directors in the world that isn’t smiling over what they gave away," Dzubeck said. For example, agreeing to offer DSL without local phone service and accept caps on DS-1 and DS-3 rates affect traditional voice and leased-line businesses that are now fading, he said.
The requirement for settlement-free peering does prevent the carriers from imposing high peering charges to keep out traffic from other service providers, he said.
