N.J. Public Advocate and Rate Counsel Urge FCC To Deny Pending AT&T BellSouth Merger, Call Proposed Merger Harmful to Consumers

Newark, N.J.—The Department of the Public Advocate today announced that it is urging the Federal Communications Commission (FCC) to reject the pending merger between AT&T and BellSouth Corp. because it could allow the companies to exercise market power and would be harmful to consumers. In the event that the FCC decides to approve the merger, the Public Advocate has requested that conditions be imposed to protect consumers.

Public Advocate Ronald K. Chen and Rate Counsel Seema M. Singh said they are against the proposed merger because the companies have not demonstrated clear benefits for ratepayers and the merger will hinder competition. In ex parte comments filed on Oct. 3, 2006, with the FCC, Rate Counsel highlighted its concerns with the merger. As a result of the merger being unconditionally approved by the Justice Department on Oct. 11, 2006, the FCC is now the only regulatory agency that can impose conditions to protect consumers. The FCC had been scheduled to discuss the matter on Oct. 13, 2006, but it deferred discussion following requests for additional public notice and comments. The FCC has asked that additional public comments be submitted to them no later than Oct. 24, 2006.

“The proposed merger between AT&T and BellSouth has no benefits to ratepayers, only harm,” said Chen. “If the FCC agrees to the merger, its approval should be contingent upon enforceable conditions that alleviate risks for consumers and mid-sized and enterprise businesses with strong incentives for compliance and clear standards for enforcement.”

Singh said Rate Counsel, following an analysis by its expert consultants of whether the proposed transaction is in the public interest, is requesting that the FCC carefully review the strategic and planning documents that the two companies have designated as highly confidential because, among other things, they are not available to the general public, yet contain important information about the companies’ market power and sales strategies.

“Our analysis found this merger has no benefits for ratepayers,” said Singh. “The FCC should impose conditions to ensure consumers gain from merger synergies and this could open the door to new discussions, including issues that would be beneficial to New Jersey consumers.”

Singh noted the following as among the key recommendations for the merger:

• The FCC should not approve the proposed merger unless and until AT&T demonstrates its compliance with the conditions on the AT&T/SBC merger, especially AT&T’s provision of stand-alone digital subscriber line (“DSL”) service.

• The FCC should determine a procedural mechanism that allows them to consider the evidence of the respective companies’ marketing and sales plans, which are described in highly confidential documents submitted in this proceeding and bear directly on the flaws in the existing separations of corporate processes. A key examination of these processes should be to determine whether the respective companies’ customers are cross-subsidizing BellSouth’s unregulated lines of business.

• The companies should commit to the deployment of broadband throughout their operating territory as part of basic service with no increase in Plain Old Telephone service (POTs) prices. This would move forward an important national and New Jersey goal of providing broadband communications for all consumers

• Net neutrality conditions are essential to protect consumers and competitors from undue control of access to the Internet, allowing them to have the provider of their choice.

• The FCC should require the petitioners for the merger to offer video, DSL, and other non-telecommunications services through structurally separate entities complying with affiliate transaction rules.

• The FCC should impose a condition that the companies must offer an à la carte option for any video offering in addition to various packages for consumers.

• The FCC should condition its approval of the merger on the companies’ assignment and allocation of a fair share of the public switched telephone network away from regulated services to unregulated services, which would lower local rates.

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The Division of Rate Counsel is a division within the Department of the Public Advocate and represents the interests of consumers of electric, natural gas, water/sewer and telecommunications and cable TV service. Additional information on this and other utility matters can be found at the Division’s website at http://www.rpa.state.nj.us. The Department of the Public Advocate website is http://www.state.nj.us/publicadvocate.

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