DOJ Clears SBC-AT&T, Verizon-MCI

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The Department of Justice Thursday approved SBC Communications Inc.’s merger with AT&T Corp. and Verizon Communications Inc.’s takeover of MCI Inc. under consent decrees that require the firms to divest local fiber-optic-network facilities serving businesses customers in hundreds of buildings in 19 cities.

“Today's action by the department ensures that business customers that provide or buy telecommunications services to locations in Verizon's and SBC's territories will continue to benefit from competition," Thomas Barnett, acting assistant attorney general in charge of the department's Antitrust Division, said in a prepared statement.

Legg Mason Wood Walker Inc. media and telecommunications analyst Blair Levin said the DOJ imposed “modest conditions” on the two Bell mergers.

The Federal Communications Commission is scheduled to approve the same mergers Friday. But the agency is short one commissioner, leaving it evenly divided between two Republicans and two Democrats. Political gridlock could take the FCC more time to act.

The SBC-AT&T deal was valued at about $16 billion at the time it was announced, slightly less than the value of the acquisition of Adelphia Communications Corp. by Time Warner Inc. and Comcast Corp. The Verizon-MCI deal was valued at $8.5 billion.

After closing, SBC plans to change its name to AT&T. “The AT&T name has a proud and storied heritage, as well as unparalleled recognition around the globe among both businesses and consumers,” SBC chairman and CEO Edward E. Whitacre Jr. said.

Consumer groups complained that the two mergers will lead to higher prices for local and long-distance phone service, as well as high-speed-data and wireless services.

"Rubber-stamping these mergers is an embarrassing milestone in this nation because it puts an end to any real hope of head-to-head telephone competition," Consumers Union senior director of public policy Gene Kimmelman said in a prepared statement.

In approving the mergers, the DOJ rejected a condition proposed by New York State Attorney General Eliot Spitzer, who publicly supported the a la carte sale of digital-subscriber-line service. Spitzer complained that Verizon customers would not experiment with other voice providers if they had to buy local phone service and DSL in a package from Verizon.

In FCC filings, Bright House Networks, an MSO with 2.2 million subscribers, has advocated “naked DSL” rules to promote voice competition between cable and phone companies.

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