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The Federal Communications Commission is likely to delay until late October approval of two major telecom mergers, according to agency sources. Despite a 2-2 split between Republicans and Democrats on the commission, Chairman Kevin Martin is pressing agency staff to draft orders approving SBC Communications Inc.’s proposed $16 billion purchase of AT&T Corp. and Verizon Communications Inc.’s $6.75 billion union with MCI Inc. The agency sources also said they expect the draft to be circulated to the commissioners in “the next couple days.” Martin hopes to schedule a vote of commissioners to approve his merger plan by the agency’s next scheduled FCC public meeting on Oct. 12. But sources close to the agency say that target date is too difficult to achieve and the meeting is likely to be pushed back until the end of the month while commissioners barter over conditions on the deals. Democratic commissioners have leverage to win conditions because a vacant Republican FCC seat means Martin needs at least one of their votes to approve the deals. Democratic commissioners Jonathan Adelstein and Michael Copps are still generally in the dark about what conditions, if any, Martin may be considering for the telecom deals, sources said. But even if Martin agrees with some conditions Copps and Adelstein support, they are expected to need additional time to review his offer and possibly parlay for other changes. One condition the Democratic commissioners are likely to press is requiring the merging companies to offer broadband digital subscriber line service “naked” — in other words, without requiring DSL consumers to take the merged companies’ phone services. The idea has bipartisan support from top lawmakers, including Sens. Mike DeWine, R-Ohio, and Herb Kohl, D-Wis., chairman and ranking Democrat, respectively, on the Judiciary Committee’s antitrust subcommittee. Both are pressing the FCC and Department of Justice to require naked DSL. Verizon Communications has begun offering a naked DSL service voluntarily in some regions but generally at a higher price than the total price consumers pay when both services are bundled. The concern is that if the agency requires naked DSL, Verizon and SBC will offer it at the same price as a bundled service, eliminating any advantages for consumers. The agency is unlikely to install price restrictions on such a measure, sources close to the agency said. Commissioners may also wrangle over whether the big Bells need to divest some so-called special access lines, high-capacity cables they own that connect businesses to communications systems operated by long-distance companies and others. Bell rivals such as MCI and AT&T have for years complained about the rising cost of these lines. Both companies provide them in many of the same markets, and regulators may worry that their combination with Verizon and SBC will in some markets eliminate competition there or significantly hamper it — reducing the number offering the lines from three to two. The DOJ and FCC may also require the Bells to divest customers in some markets. If regulators require divestiture of business customers and special access lines, the most likely (and most interested) buyers are Qwest Communications International Inc. and Sprint Nextel Corp., which both offer enterprise telecom services. Another concern is whether the FCC should impose a condition that would prevent the two megatelecom companies from colluding. The concern is that Verizon-MCI may offer some sort of special cozy low interconnection rates to SBC-AT&T and vice versa, while other smaller telecom companies won’t get such a contract. Copyright �2005 TDD, LLC. All rights reserved.

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