WASHINGTON (MarketWatch) -- The
Federal Communications Commission has delayed its vote again on the
proposed $80 billion merger between AT&T Inc. and BellSouth Corp.
because of partisan split at the federal watchdog agency.
The FCC postponed the vote, slated
for Friday, for the third time after Republican and Democratic
commissioners failed to agree on possible concessions by the phone
companies. The latest delay comes just days before the U.S. congressional
elections.
The two Democrats on the FCC's
five-member commission insist that the phone companies adopt measures they
believe would protect competition and the interests of customers. They
were harshly critical of the Justice Department's decision last month to
approve the merger without any strings attached.
Two Republicans on the commission
support the deal, including Chairman Kevin Martin. Yet the third GOP
member, Robert McDowell, has recused himself because he used to lobby for
rivals of AT&T (T)
and BellSouth (BLS).
The resulting 2-2 deadlock has
given Democrats leverage to extract concessions, They forced a
postponement of the original vote on Oct. 12 and could not reach an
agreement with their Republican colleagues or representatives of the phone
companies despite extended talks.
The phone companies have made a
number of proposals in an effort to win approval for the merger and
negotiations continued right up to Thursday afternoon before Martin
decided to scrap the vote.
They've promised to sell
stand-alone DSL Internet service in all its territories, offer monthly $10
DSL connections to new customers and freeze certain wholesale rates paid
by competitors that lease its phone lines, among other things. Consumer
groups and other critics deride the concessions as ineffectual.
Martin could try to hold another
vote shortly after the election, especially if the Republicans retain
power. Regulatory analysts and phone-company executives believe the
election has influenced the outcome of the vote in light of criticism of
the merger from some Democrats in Congress. The phone companies have
sought to influence the Democrats at the FCC by sending them a list of 27
members of their own party in Congress who approve of the deal.
If the FCC's two Democrats don't
relent, Martin likely would try to use his power as chairman to get
McDowell to vote in order to break the tie. He has that authority under
certain conditions, but McDowell would need a few months to study the
issue, analysts say.
Some analysts have raised the
specter of the Democrats, if they win control of Congress, investigating
the FCC if Martin pursued that strategy, but lawmakers probably cannot
block the deal. Several dozen Democrats in the House and Senate do support
the merger and control of the FCC would remain in the hands of the
Republican White House. By law, the party that holds the presidency gets
to choose three of the five FCC commissioners.
Support for the deal by the
antitrust division of the Justice Department also weighs in the favor of
the phone companies. The department determined that the merger would not
"substantially" harm competition and that it would also benefit
consumers.
If approved, the merger would
create the largest telecommunications provider in the United States, with
more than 300,000 employees, annual revenue of $120 billion and a market
value of more than $200 billion.
AT&T, formerly known as SBC
Communications, is the largest long-distance operator in the United States
and the dominant local phone provider in California, Texas and the
Southwest.
BellSouth is the main local phone
company in the Southeast. The combined entity would cater to 70 million
local phone customers in 22 states.
The two companies already co-own
Cingular Wireless, the biggest mobile operator in the United States.