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In a move that could be a boon to consumer Internet telephone companies such as Vonage Holdings Corp., the Federal Communications Commission on Monday approved SBC Communications Inc.’s proposed $16 billion purchase of AT&T Corp. and Verizon Communications Inc.’s $8.4 billion union with MCI Inc., after forcing several concessions from the companies. The commissioners voted unanimously to approve the controversial deals after negotiating throughout the weekend. Lingering disagreements among the commissioners forced postponement of the FCC’s scheduled approval last Friday. Many telecom experts predict the deals will transform the industry because they place an enormous share of voice, Internet and wireless assets in the hands of two companies. “The transactions are consistent with and will further many of the commission’s competition, broadband and public-safety priorities,” said FCC chairman Kevin Martin. The FCC decision comes four days after the Justice Department approved the transactions and clears the way for the companies to close the mergers by early next year. Despite Martin’s opposition to conditioning the deals, a compromise he reached with other commissioners requires the merging companies to offer broadband digital subscriber line service without forcing customers to sign up for phone service as well. The companies must begin offering DSL as a stand-alone service within 12 months of the closing of the deals. The provision will remain in place for two years. Commissioners Jonathan Adelstein and Michael Copps both said they would have preferred to see greater divestitures than what the DOJ previously required, but they dropped those demands in an effort to compromise with Martin. This so-called “naked DSL” requirement should make it easier for consumers to obtain DSL from one of the two companies and use Vonage or any other provider of Internet-based voice service, or voice over Internet protocol. The phone companies resisted the condition, contending that it gives cable companies a competitive advantage because the FCC has not required them to offer their broadband service separate from voice service that they are beginning to offer around the country. In a brief interview with reporters after the meeting, Martin said he did not support such a condition for cable companies. “I am not convinced we need it for cable companies,” he said. Still, this merger’s unbundling requirements could become a template that the commissioners or consumer advocates could try to apply to future cable mergers. Although SBC and Verizon will be prohibited from forcing customers to purchase bundled traditional telephone business and DSL, the order does not spell out whether Internet voice service could be a required add-on to DSL. The distinction is important because SBC plans to begin offering AT&T’s VoIP service, CallVantage, along with its DSL service. Mark Cooper, research director at Consumer Federation of America, said he was also concerned that the condition did not include price restrictions. Cooper said he was concerned that Verizon or SBC could offer a standalone DSL service at a prohibitively high price. The agency also required that SBC and Verizon freeze the wholesale prices they charge competitors to lease high-capacity business lines, so called “special access lines,” for 30 months. This temporarily prohibits any price changes in the high-speed connections that large business customers use. Commissioners also agreed to “net neutrality” principles that prohibit Verizon and SBC from blocking or degrading the transmission of any competitor data or voice services. Antitrust enforcers at the Justice Department cleared the telecom deals with minimal divestitures last week. As part of the agreement, Verizon and SBC will be required to lease to rivals any spare capacity on their networks in buildings where the mergers eliminate competition for business customers. Randolph Smith, an antitrust attorney representing SBC at Crowell & Moring in Washington, said SBC will auction off extra fiber capacity in the buildings included in the DOJ agreement. SBC rivals will pay a one-time fee for leasing the networks for a set long term lease, 10 years or more. Copyright �2005 TDD, LLC. All rights reserved.

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