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Senators bristle at FCC chief's enforcement of AT&T-BellSouth merger
By Paul Davidson
USA Today
Friday, February 2, 2007

The chairman of the Federal Communications Commission faced tough questions from a Senate panel Thursday over his comments that he would not enforce a key condition the FCC imposed before approving of the AT&T-BellSouth merger.

At a Senate Commerce Committee hearing Thursday, Committee Chairman Daniel Inouye, D-Hawaii, suggested FCC Chairman Kevin Martin, a Republican, did not intend to "stand by the deal" and that he was obliged to withhold his vote and negotiate further if he had concerns about any of the conditions.

The $86 billion merger the largest in telecom history was approved in December by a 4-0 vote after weeks of negotiations between the commission's two Democrats and two Republicans.

The condition in question would require the combined company to slash the rates it charges competitors and big businesses to lease private, high-speed data lines in deregulated markets.

It was among a laundry list of concessions pushed by the FCC's two Democrats to win their votes, and it stands to have perhaps the biggest impact on AT&T's bottom line, costing it a projected $500 million over four years.

But in agreeing to the requirement, AT&T said it would not slash the prices it charges Verizon and Qwest, two of its largest rivals, unless the two local phone giants lower the lease rates they charge AT&T in their territories.  AT&T, Verizon and Qwest all have long-distance units that serve big businesses outside their regions.

Verizon and Qwest say they will not cut their prices for AT&T.

In a statement released when the FCC approved the deal, Martin and Republican Commissioner Deborah Tate suggested they would not enforce the condition because it improperly imposed obligations on other carriers.  They also said if Verizon and Qwest can't get the low rates, the concession would conflict with FCC rules that require wholesale services to be offered to all carriers on equal terms.

On Thursday, Martin told Inouye he was abiding by the deal but that while AT&T could submit tariffs, which are legal documents detailing its reduced prices, he would not approve them.

"You're not allowed to discriminate among the different companies in terms of who you offer discounted prices to," Martin said.  "Where the commission would have to take affirmative action, we said no, we would have hesitation doing that."

Democratic Commissioner Jonathan Adelstein told lawmakers he was unaware of Martin's concerns until after the vote.  "It's hard for me to understand how we cannot implement something that was (voted for) unanimously," he said.

He also said FCC rules bar only unreasonable price discrimination and that offering different prices in this case would be "reasonable."

In a letter to Martin on Wednesday, Reps. John Dingell, D-Mich., and Ed Markey, D-Mass., also pressed him about his comments.  He's expected to be grilled about them again at a House hearing Markey will chair on Feb. 15.