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As the Federal Communications Commission nears a decision on two major telecom deals, business rivals and consumer advocates on Wednesday spelled out the specific conditions they say must be imposed before the agency approves the transactions. 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. now and is aiming to clear them by the end of the month. The Department of Justice also must approve the deal, but its conditions are expected to be no more than limited divestitures. The FCC’s Democratic commissioners have not addressed the latest specific demands but have supported general anti-bundling conditions. A vacant Republican FCC seat has resulted in a 2-2 partisan split that gives Democratic commissioners leverage to win conditions because Martin needs at least one of their votes to approve the deals. Both Verizon and SBC officials have said they oppose any conditions on the mergers. Business groups on Wednesday at a press conference in Washington organized by a consumer and competition advocacy group, American Antitrust Institute, pressed the agency to require the merging companies to offer broadband digital subscriber line service without forcing DSL consumers to take the merged companies’ phone services as well. Earl Comstock, president of rival telecom association CompTel, said the FCC’s so-called “naked” DSL conditions must ensure that the Bells will offer broadband separate not only from traditional “circuit switched” voice service but also from increasingly popular voice over Internet protocol, a broadband service he fears will be overlooked in an anti-bundling condition. The business groups also demanded the FCC freeze current wholesale rates so that SBC and Verizon cannot use their consolidated market power to hike rates they charge other telecom companies to access their networks. “Now is not the time to have price increases,” said Russell Merbeth, counsel for Eschelon Telecom Inc. Changes in access prices will ultimately be passed on to already-struggling small and medium-size businesses, he said. The deal’s critics also are pressing the commission and the Department of Justice to require that Big Bells divest some so-called special access lines, high-capacity cables that connect businesses to their long-distance companies and other communications services. The merging companies provide them in many of the same markets, and both combinations could eliminate or at least significantly hamper competition in some markets by reducing the number of companies offering the lines to two from three. Because there aren’t qualified buyers in most markets for major back-haul lines, the critics acknowledged, divestitures won’t be sufficient to solve the potential competitive problems. Nevertheless, they insist sales should be ordered in the few markets where a third competitor can be found. “Divestitures are not a panacea,” said Jonathan Rubin, senior research fellow at the AAI. “But two is not a good number. You need to have three, four or five companies competing.” Brian Moir, an attorney for the e-Commerce and Telecommunications Users Group, which represents large business users of telecom services, said the DOJ is only considering divestitures in 1 percent of markets affected by the deals. “Businesses will have less choice than consumers have at home,” he said. “There are clear monopoly issues out there.” 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. Rubin also pointed out that the AAI would like to see the FCC consider requiring the merging companies to market, invest and expand their business outside of their traditional regional service areas. He noted that the Bell companies have traditionally been averse to competing in each other’s territories and he worried that they would continue such an approach after the deals are complete. “We want them competing toe to toe, not walking arm in arm,” Rubin said. A related concern is whether the FCC should specifically bar the two megatelecoms from colluding. If Verizon-MCI and SBC-AT&T strike cozy interconnection deals, other smaller telecom companies might not get as good a deal. Martin hopes to schedule a vote on the mergers by the agency’s next scheduled FCC public meeting on Oct. 12. But sources close to the agency contend that a date that early is unlikely because the commissioners are still debating the conditions and because Martin’s wife is expected to give birth imminently and he is likely to take time off after she delivers. A more likely date for the vote is Oct. 27, sources say. Copyright �2005 TDD, LLC. All rights reserved.

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