When the Baby Bells ring up the Federal Communications Commission, they rarely get put on hold.
The five-member agency approved a series of billion-dollar telephone deals over the last decade and experts expect it will also bless the latest Baby Bell telephone deal, AT&T Inc.’s plan to buy BellSouth Corp. for $65 billion.
“We will carefully weigh the information presented, examining any allegations of specific harm in individual markets and the potential benefits for the deployment of new services,” FCC Chairman Kevin Martin said in a statement.
Last year he urged the agency approve two large Bell deals with no conditions. However, because the FCC was split with two Republicans, two Democrats and one vacancy, they compromised on a handful of concessions.
Before Martin became chairman he was not seen as a close friend of the Bells, mostly because of his 2003 vote that kept regulations requiring the carriers to continue sharing their networks with competitors.
After a court threw out those rules, Martin voted to ease them and has since been more sympathetic. Since taking the reins as chairman a year ago this month, he pushed through efforts to ease regulation of the Bells’ high-speed Internet service, known as broadband.
“There really was a need to restore investor confidence in the telecom space” after the Internet bubble burst, said Stanford Washington Research Group analyst Paul Glenchur. ”Deregulatory, pro-investment policies were very much needed at the time.”
Now, the Bells want the FCC and Congress to ease their path to offering subscription television service so they can compete with cable companies, which compete with them in the telephone and broadband business.
AT&T and Verizon Communications, the No. 1 and No. 2 telephone companies, have teams of lobbyists and lawyers pressing Congress and the FCC that obtaining licenses from thousands of cities to offer video is too cumbersome.
In response, the FCC is reviewing whether local authorities have been making it too difficult for the Bells to get video licenses and Congress is considering legislation.
“They have a huge lobbying contingent, they know their way around the (FCC) building more than most, (and) they have a lot of political clout on Capitol Hill,” said former FCC Chairman Michael Powell.
While he said any party simply needs to win three votes at the FCC, the Bells are facing a tougher marketplace. The mergers and video proceeding may help the FCC show it is taking action to offer consumers some competition, Powell said.
“The commission ends up making what are decisions that foster competition and more often than not are areas where the Bells haven’t been participating,” Ed Merlis, an executive at the U.S. Telecom Association, which represents the Bells and other carriers.
After the 1984 breakup of AT&T into seven regional Bells and the 1996 Telecommunications Act, the carriers have reentered the long-distance business with FCC approval and the Bells have combined, leaving three carriers if the BellSouth deal is approved.
In a sign of how times change, in 1997 then-FCC Chairman Reed Hundt, a Democrat, said a Bell and long-distance carrier merging was “unthinkable.”
After loud protests by consumer groups and rivals, the FCC did attach a few conditions last year to Verizon’s purchase of MCI Inc. and SBC Communications’ purchase of AT&T to form AT&T Inc., including requiring them to provide customers unfettered Internet access for two years.
AT&T and Verizon have said they may charge more for services that use faster, private Internet networks, like for downloading movies, sparking protests from content providers Google Inc. and Internet phone company Vonage.
The content companies may “become a lot more engaged during this merger review, figuring this could be their best shot to made progress on an issue that both Congress and the FCC have been reluctant to tackle,” Glenchur said.
Consumers Union and the Consumer Federation of America said they would ask the government to block the AT&T-BellSouth deal because it would lead to higher prices.
And some are now eyeing the new Republican FCC nominee, telecommunications lawyer Robert McDowell, who is now counsel to Comptel, the trade group that represents the Bell competitors.
“We do not think, however, that this means that he would oppose the (AT&T-BellSouth) deal or even necessarily require conditions he advocated as a lawyer,” Blair Levin, an analyst with Stifel, Nicolaus & Co. Inc., said in research a note.
The Senate Commerce Committee Thursday holds a confirmation hearing for McDowell and he will likely be asked about the transaction.
