AT&T might lock rates to win BellSouth OK

AT&T Inc. thinks it should be able to buy BellSouth Corp. with no conditions, but it's willing to compromise if necessary.

In meetings with the U.S. Federal Communications Commission (FCC), the company has discussed not raising rates charged to other carriers to use its facilities, as well as locking in prices for business leased lines, according to a Friday letter from AT&T to the agency.

The FCC is the last body that has to sign off on the US$67 billion acquisition, which was approved by the U.S. Department of Justice and state and foreign agencies without conditions. The deal would fold the incumbent carrier for most of the Southeastern U.S. into the nation's largest service provider.

Consumer groups and competitive carriers have voiced alarm over the deal in the wake of recent consolidation in the industry, saying it will reduce choice for businesses and consumers. On Friday, a divided FCC delayed a decision on the deal and opened a public comment period. It is now set to vote on Nov. 3.

Among other proposed conditions, the merged carrier would agree to keep offering competitors access to its network and not seek higher state-approved rates for that access. It also would not raise rates for DS-1 and DS-3 leased lines in its territory, nor would it increase its interstate tariffs. AT&T/BellSouth also would do business in line with the principles of an FCC policy statement on network neutrality issued last September. Most of the conditions would stay in effect for 30 months from the close of the deal.

Other steps that have been discussed give a glimpse into AT&T's possible plans. One proposal would have AT&T provide broadband -- though defined only as Internet access over 200K bps (bits per second) -- to all residences in the BellSouth territory by the end of 2007. Only 85 percent of that would be wired broadband, while the remainder would use alternatives including satellite and WiMax. Another point discusses AT&T initiating 10 new trials of wireless broadband, including at least five in BellSouth's territory, by the end of 2007.

The Computer & Communications Industry Association dismissed the proposed conditions, saying AT&T is already bound by such rules from its merger last year with SBC Communications Inc.

"It's kind of a restatement and a slight extension of those," said Catherine Sloan, vice president of government relations for the group.

The group, made up of companies including Google Inc., Microsoft Corp., Red Hat Inc. and Verizon Communications Inc., has called the proposed acquisition a step backward. It wants strong network neutrality rules, consumer privacy protection, divestiture of wireless spectrum and other conditions imposed on the company.

For consumers, worries about reduced competition among telecommunications carriers are backward-looking, because the next great showdown will be between phone companies and cable operators, said telecom industry analyst Jeff Kagan. However, he acknowledged that coming battle doesn't yet benefit enterprises because cable companies are largely ignoring businesses for now.