Thursday, December 28, 2006

AT&T + BellSouth Deal Closes, Following Last Minute Concessions

The FCC voted 4-to-0 to approve AT&T's acquisition of BellSouth, concluding that the largest telecom merger in U.S. history would offer significant public benefits, including increased competition for video services and the creation of a stronger player in national communication services.

The merger was completed immediately following the vote.

"AT&T will be an engine for innovation, competition, and growth for our customers at home and abroad," said AT&T Chairman and CEO Edward E. Whitacre Jr. "In the Southeast, we will build on BellSouth's excellent record of serving customers and communities. And we are ready to lead the way in a new era of integrated wireless services nationwide."

The company said it will begin the integration process to converge the AT&T, BellSouth, and Cingular wireless and wireline IP networks, combine product portfolios and integrate customer care capabilities. AT&T will launch extensive new advertising, which will begin the transition of the BellSouth brand name to AT&T. AT&T will re-brand Cingular through a co-branded transition, which is scheduled to start in 2007.

The FCC decision, which came on the final business day of 2006, followed a series of last minute concessions from AT&T that ultimately swayed the two Democrat commissioners who had earlier withheld their approvals of the merger.

The list of new concessions includes:

  • For a period of 30 months, AT&T agrees to abide the principles of Net Neutrality set forth in the FCC policy statement of September 23, 2005.

  • AT&T commits that it will maintain a neutral network and neutral routing in its wireline broadband Internet access service. The company will not provide to any Internet content, application or service provider, including those affiliated with AT&T/BellSouth, any service that privileges, degrades or prioritizes any packet transmitted over its wireline broadband Internet access service based on its source, ownership or destination. The commitment applies from the network side of customer premise equipment (CPE) up to and including the closest Internet Exchange Point. AT&T said this commitment does not apply to its enterprise managed IP services nor to its IPTV service. The commitment will sunset two years from the merger closing date or the effective date of any future legislation on Net Neutrality enacted by Congress.

  • For three years, the company agrees to maintain at least as many settlement-free peering arrangements for Internet backbone services as it does today on the merger closing date.

  • By the end of 2007, AT&T will offer broadband (greater than 200 kbps in at least one direction) to 100% of residential living units in the AT&T/BellSouth in-region territory -- this includes at least 85% wireline coverage and the rest via broadband wireless technologies, such as WiMAX.

  • AT&T will offer DSL (up to 768 kbps) for $10 per month for up to 30 months to new customers who have never before subscribed to DSL.

  • AT&T promises to accelerate the rollout of its Uverse and HomeZone video services in BellSouth territory.

  • AT&T/BellSouth shall not seek any increase in state-approved rates for UNEs.

  • AT&T/BellSouth promises not increase the rates paid by existing customers of DS1 and DS3 private line services.

  • For a period of 30 months, the company will offer DSL without requiring customers to purchase a circuit switched voice line. The rate for this service will not exceed $19.95 (exclusive of regulatory fees and taxes).

  • The company will offer ADSL transmission service to other ISPs that is functionally equivalent to the same service AT&T offers in-region as of the date that the merger closes.

  • The company agrees to sell or transfer all of the 2.5 GHz wireless spectrum currently licensed or leased by BellSouth.

  • By 2010, the company agrees to offer service in the 2.3 GHz band to 25% of the population in the service area where it holds WCS licenses.

  • AT&T/BellSouth will repatriate 3,000 jobs that are currently outsourced by BellSouth abroad.

Following the vote, FCC Commissioner Jonathan Adelstein, who pushed for the additional concessions from AT&T, commented "One hallmark of this Order is that it applies explicit, enforceable provisions to preserve and protect the open and interconnected nature of the Internet, including not only a commitment to abide by the four principles of the FCC Internet Policy Statement but also an historic agreement to ensure that the combined company will maintain a neutral network and neutral routing in its wireline broadband Internet access service."

In a separate statement, FCC Chairman Kevin Martin objected to many of the concessions, saying that while they may have helped close the merger, the concessions were unnecessary and ran counter to other FCC policies. "The conditions regarding net-neutrality have very little to do with the merger at hand and very well may cause greater problems than the speculative problems they seek to address. These conditions are simply not warranted by current market conditions and may deter facilities investment."http://www.att.comhttp;//