Fcc Wary Of Telephone Merger Proposed Deal Between At&T; And Sbc Is ‘Unthinkable,’ Outgoing Official Says

A joining of telephone titans AT&T Corp. and SBC Communications Inc. would stifle competition, the nation’s top telecommunications regulator declared Thursday, signaling opposition to what would be America’s largest merger.

A 1996 law, meant to spur local and long-distance companies to compete against each other, is creating instead an unprecedented wave of telephone and media mergers.

Though it hasn’t been proposed formally, the latest merger under negotiation would unite AT&T, the largest long-distance company, with SBC, now the nation’s biggest local Bell telephone company.

“My belief is that a combination of AT&T and a regional Bell operating company is unthinkable,” Federal Communications Commission Chairman Reed Hundt, a former antitrust litigator, said in a speech at the Brookings Institution.

Hundt’s remarks respond to a recent comment by AT&T Chairman Robert Allen that a hypothetical $50 billion merger between AT&T and SBC is “not unthinkable.”

So large a merger ultimately would have go to the Department of Justice for a determination whether it potentially violates antitrust laws. The FCC also would have to approve the transaction on the ground that AT&T, SBC and eventually the merged company serve the public.

The chairman and ranking Democrat of the Senate Judiciary antitrust subcommittee, Sen. Mike DeWine, R-Ohio, and Sen. Herb Kohl, D-Wis., share Hundt’s concerns about an AT&TSBC merger.

“The FCC should follow the dictates of the act to reject mergers that diminish the prospects for greater competition,” they said in a letter to Hundt.

A White House official would not comment on Hundt’s remarks.

“He’s mopping up after the DOJ,” said Gene Kimmelman, co-director of the Consumer Union’s Washington office. Kimmelman believes Justice has been too easy on telecommunications mergers. “The Clinton administration’s antitrust policy is bankrupt,” Kimmelman said. “Hundt is coming in the ninth inning to save the law, but it’s not clear what he can do.”

Specialists viewed Hundt’s speech as a signal of a tougher approach to evaluating mergers by the agency. In an interview, Hundt rejected that. “I don’t think I said anything that changes our precedent or our approach,” he said. “I think we give pretty close attention to all these transactions all the time.”

Discussing the expected AT&T-SBC merger, Hundt applied an anti-trust analysis the Justice Department rejected when it reviewed and ultimately cleared Bell Atlantic’s takeover of Nynex.

Under that analysis, a proposed merger would be blocked if the government can prove that the two companies involved actually had intended to compete against each other. Hundt indicated that would be the case with AT&T and SBC. Such a combination would thwart competition because the companies would have invaded each others’ markets, he said.

‘It’s difficult to imagine that any other firm will be a more effective broad-based local entrant than AT&T,” the largest long-distance company, Hundt said.

Reacting to Hundt’s speech, his strongest remarks yet against mammoth mergers, AT&T said competition would be protected before completion of a merger agreement. “If a partnership … can be structured to increase competition …, then it ought to be considered,” Mark Rosenblum, an AT&T vice president, said.

SBC would not comment.

The goal of the 1996 law was to increase competition, which in theory would expand choices and lower prices.

Hundt, who plans to leave the FCC once a successor is confirmed, fears that AT&T joining with SBC or any other local Bell company would violate the spirit of the 1996 law. It also would violate the purpose of a now-defunct consent decree that broke up the Bell System in 1984 into AT&T and seven local phone company off-spring dubbed the Baby Bells.

While Hundt specifically struck out against the expected AT&T-SBC merger, he did not address the $23 billion Bell Atlantic-Nynex one now pending before the FCC.

That union would create the largest local phone company in the country, serving local phone customers from Maine to Virginia.