October 31, 2005 12:17 PM PST

Telecom megamergers get final federal OK

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The Federal Communications Commission on Monday gave the nod to SBC Communications' merger with AT&T, and Verizon Communications' merger with MCI. It's the last federal approval needed before the deals can move forward.

The U.S. Department of Justice gave the companies the green light last week.

"After two Federal reviews and strong approvals by shareholders and the international community, it is clear that this combination is undeniably in the public interest," Tom Tauke, an executive vice president of public affairs at Verizon, said in a statement. "The Department of Justice and FCC approvals put us on firm footing as we seek the remaining few state approvals."

The FCC vote came after days of intense negotiation among the companies and commissioners. In the end, Verizon and SBC were required to agree to a set of conditions in order to win the approval from the agency.

SBC and Verizon, which are acquiring the No. 1 and No. 2 players in the business telecommunications market respectively, are required to freeze their rates for leasing wholesale access to their networks for 30 months.

The companies also agreed to a provision that requires them to offer, within 12 months of the merger closings, "naked DSL" to consumers for at least two years. The "naked DSL" provision will enable consumers to subscribe to high-speed Internet services without having to sign up for phone service through the same provider too. Verizon has already been offering "naked DSL" to customers in some regions of its territory. SBC does not yet offer it, but it has been testing the service.

In addition, the companies will allow customers to access any Web site they choose and to use any applications they choose on their broadband connections, for a period of two years. These provisions are a big win for voice over the Internet (VoIP) companies such as Vonage and Skype that use consumer broadband connections to deliver telephony services over the public Internet.

In another provision, Verizon and SBC said that they will continue for the next three years to swap Internet traffic with the same number of providers that they swap with now.

Executives from SBC, which plans to adopt the AT&T name after the merger closes, were pleased with the vote.

"We commend the commission, under the leadership of Chairman Martin, for recognizing the reality of today's communications marketplace and for fostering an environment where there will be greater choice in communications services and providers," Edward Whitacre, SBC's chief executive officer, said in a statement.

The Verizon-MCI deal, now valued at $8.6 billion, is expected to close later this year or early next year. The companies already have received approvals from international regulatory bodies, as well as most state-level commissions. SBC plans to close its $16 billion merger with AT&T later this year.

 

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