FCC approves telecom mega-mergers

FCC commissioners this week approved two mergers combining the two largest U.S. local telecom carriers with the two largest U.S. long-distance companies to form corporations positioned to have a huge impact on the enterprise market.

The mergers theoretically would allow SBC/AT&T and Verizon/MCI to compete more effectively with Sprint Nextel—which now packages long distance, cellular and push-to-talk services—in the enterprise sector, assuming that SBC/AT*T and Verizon/MCI successfully develop their own P2T services.

With the approval, SBC Communications’ purchase of AT&T and Verizon Communications’ purchase of MCI have cleared their final significant regulatory hurdles. Mergers between such powerhouse companies would not have considered by regulators five years ago, but a changing marketplace resulted in both deals being approved yesterday without any divestiture requirements.

“We are seeing both intermodal and intramodal providers aggressively competing for customers using a multitude of new technologies and platforms,” FCC Chairman Kevin Martin said in his prepared statement. “The telecommunications industry is a constantly evolving one, and the consummation of these mergers represents the opening of a new chapter in communications history.”

Although the FCC did not impose any divestiture requirements, conditions were attached to the mergers. Both merged carriers must offer “naked DSL”—unregulated, standalone DSL service that does not require a customer to also purchase phone service—and to freeze wholesale access rates to competitors for at least 30 months. In addition, the carriers must abide by the regulatory agency’s “net neutrality” policies.

Democratic Commissioners Michael Copps and Jonathan Adelstein concurred with the merger approval while expressing reluctance.

“I could not support these mergers in the absence of reasonable conditions,” Adelstein said. “Without conditions, there is a real possibility that these combinations would increase rates for both residential and business consumers and put at risk the continued existence of the open and robust Internet.”