SBC and Verizon both win merger clearance

SBC and Verizon on Monday successfully concluded their campaigns to win regulatory clearance for their two multi-billion dollar telecommunications deals.

The Federal Communications Commission approved both companies’ merger plans without onerous conditions.

The FCC, which has for months been evenly split between two Democratic and two Republican commissioners because of a Republican vacancy at the agency, voted unanimously to approve SBC’s $16bn takeover or AT&T and Verizon’s $8.5bn takeover of MCI following a weekend of internal haggling over the conditions of the deals.

The merger conditions agreed to by all four companies involve the temporary freeze of high-capacity special-access rates for customers in regions in which two of the merging companies overlap.

SBC and Verizon also agreed to provide a stand-alone DSL service, or service that was not bundled with traditional voice service, within 12 months of the closing dates of the deals.

Blair Levin, an analyst with Legg Mason, said the so-called “Naked DSL” provision could benefit voice over internet protocol (VoIP) providers and wireless carriers seeking to persuade customers to leave traditional Bell landline voice service.

However, he said the impact of the condition would ultimately be “limited” because the FCC did not impose price regulations on the condition.

The FCC also forced the companies to agree to “peer”, or exchange for free, internet backbone traffic with the same number of companies, and to make their peering policies publicly available for two years.

Mr Levin said he believed the condition represented the first instance of the government regulating the internet backbone.

The companies also agreed to uphold for two years an internet policy statement issued by the FCC in September that allows customers to use their broadband services for any application they want.

Kevin Martin, the FCC chairman, said approval of the deals would permit the companies to offer a more diverse range of services to a broader range of customers, and would provide incentives for the companies to invest in broadband infrastructure.

“Let me say that I do not believe that all of the conditions imposed today are necessary. I believe that the affected markets would remain vibrantly competitive absent these conditions,” Mr Martin said.