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Federal Communications Commission Chairman Michael Powell said Thursday that wireless and wireline phones are becoming interchangeable, suggesting the agency could be preparing to open the door to telecommunications industry mergers. “We see a much greater wireless presence and much more substitution between wireless and wireline services,” Powell said, commenting on data reported in the agency’s ninth annual competitive wireless report. Powell’s comments highlight what experts say would be a major shift in how the FCC regulates telecom providers. Rather than treat wireless and wireline as distinct industries, the agency would group the products within a single market, along with other phone services. Such a change, which would not occur in time to affect Cingular Wireless LLC’s $41 billion acquisition of AT&T Wireless Services Inc., would significantly ease deals among telecom providers. Citing the report, Powell said a growing number of people are using cell phones as their primary phone. “More and more phone minutes are taking place on wireless,” he said. According to Merrill Lynch & Co., nearly 23 percent of voice minutes in 2003 were wireless, Powell said. The FCC report said subscribers spend roughly 500 minutes a month talking on cell phones in 2003, up from 427 minutes a month a year earlier. Observers said Powell’s remarks underscore what is likely to emerge as a major debate with an FCC already riven by the agency’s approach to merger regulation. The two Democratic commissioners on the FCC’s five-member panel, Michael Copps and Jonathan Adelstein, offered a starkly different interpretation of the wireless competition report. They expressed concern that wireless telecom consolidation could hurt consumers, particularly rural subscribers. “We need to be monitoring and studying developments vigilantly, especially as consolidation creeps into the industry if we are going to see improvements continue rather than witness new problems that threaten both consumers and competitors,” Copps said. According to the report, Adelstein believes competition among wireless providers is already weak in rural regions of the United States as measured by the so-called Herfindahl-Hirschman index, a device antitrust regulators use to measure market concentration. A merger’s “score” is calculated by adding the squares of the market share of each competitor. “We have to be particularly careful in smaller markets which have higher HHI scores as we move forward,” he said. Copyright �2004 TDD, LLC. All rights reserved.

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