The Association of U S West Retirees



AT&T Merger With BellSouth Could Remain Stalled at FCC
By Amy Schatz
The Wall Street Journal
Saturday, December 8, 2006

WASHINGTON -- The Federal Communications Commission could remain deadlocked on the pending $84 billion merger of AT&T Inc. and BellSouth Corp., as a new Republican commissioner raised new questions about whether he intends to vote.

Friday, as expected, the FCC's general counsel cleared commissioner Robert McDowell to vote on the AT&T-BellSouth deal.  The five-member FCC has been deadlocked 2-2 for several months over potential merger conditions on the deal as Mr. McDowell sat out of deliberations on conflict-of-interest concerns.

Before joining the FCC, Mr. McDowell lobbied on behalf of a trade group that represents smaller phone companies.  That trade group has actively opposed the deal.

Just minutes after the general counsel's decision was released, Mr. McDowell released a statement raising the possibility that he may decline to vote on the deal, even though he's been cleared to do so.  The Republican commissioner's statement didn't say that he won't vote.  It implied he was thinking the matter over.

In the statement, he "strongly" urged his colleagues to "resolve their differences" while he reviews the general counsel's decision.  "In addition, I look forward to receiving a copy of Mr. Feder's response to Congressman John Dingell's letter of December 5," the statement said.  In that letter, Mr. Dingell, the Democratic incoming chairman of the House Energy and Commerce committee, asked 15 pointed questions about the suitability of Mr. McDowell's involvement in the merger vote.  A response to that letter is expected to be filed late Monday.

In a memo, FCC general counsel Sam Feder argued that the government's interest in seeing the merger deliberations move forward outweighed concerns about potential conflicts of interest.  He noted that both AT&T and BellSouth had agreed to Mr. McDowell's participation and that he might be "the only person available to break the impasse that has been reached in this proceeding."

However, Mr. Feder said that he consulted with the director of the Office of Government Ethics, who called the decision "a very, very close call" on which reasonable persons could differ," according to the memo.

"Ultimately its Rob's decision," said an FCC official close to the deliberations.  Bringing Mr. McDowell into the merger deliberations was "a last resort, not a first resort," the person said.

FCC Chairman Kevin Martin had hoped to put the AT&T-BellSouth merger up for a vote on Dec. 20.  However, it now appears unlikely the matter will be resolved that quickly.  Mr. McDowell is expected to publicly announce his decision on whether to vote next week.

There's been little question about whether the FCC will approve the deal, just about what conditions would be required.  Among the potential conditions that have been discussed are potential antidiscrimination rules for the Internet and price controls over high-volume data lines for business customers.

Write to Amy Schatz at