Federal regulators moving ahead with two big phone mergers

FCC chairman Kevin Martin wants the commission to take a final vote on the deals next month, two people with firsthand knowledge of the issue said Monday. They were authorized to speak about the drafts only on the condition of anonymity.

The sources would not say what conditions might be placed on the mergers to ensure competition is not compromised.

An FCC spokesman declined to comment.

SBC’s deal to acquire AT&T is valued at $16 billion while Verizon is offering $8.5 billion for MCI. SBC and Verizon already are the largest regional phone companies, known informally as “Baby Bells.” The mergers would enhance their base of business customers and expand their national and international presence.

The Bells have been peeling away long-distance customers from AT&T and MCI by offering unlimited national calling for a set rate.

Martin’s request for drafts of approval signal his intention to press ahead with the mergers despite the 2-2 split between Republicans and Democrats on the commission. The White House has not given any hint as to when it might fill the FCC’s open fifth seat, which will go to a Republican.

The Justice Department also will have to sign off on the mergers.

Analysts expect the mergers will come with conditions to ensure competition is retained in different service areas. For example, Jessica Zufolo, senior policy analyst with Medley Global Advisors, said regulators have expressed concerns about special access lines — the fiber optic lines that allow large businesses to hook to the Internet and the interstate network.

“Once you eliminate AT&T and MCI, the fear is that the Bells will be able to establish a bottleneck to large business users,” she said.

Consumer advocates say AT&T and MCI are the only real competitors to the Bells in those markets, and that competition will disappear if the mergers gain approval.

“We’re losing serious competitors for the residential consumer and the business market,” said Mark Cooper, research director at the Consumer Federation of America.

SBC spokesman Michael Balmoris declined to comment on Martin’s decision to move toward approval of the mergers, saying only that the company remains “optimistic the FCC recognizes the benefits the merger will bring in terms of greater choice, and access to new technologies.”

Verizon spokesman David Fish said its merger with MCI would benefit consumers and should get all the necessary regulatory approvals later this year or early next year.

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On the Net:

Federal Communications Commission: http://www.fcc.gov

Justice Department: http://www.usdoj.gov