Time to Review Merger Reviews

October 17, 2006 - 2 Comments

WASHINGTON, DC – Hasn’t the AT&T-Bell South merger closed yet? No. Didn’t the Justice Department approve the merger last week? Yes. So what is holding up the process? Answer: an antiquated FCC merger review process.The FCC had placed the T-BLS merger on its agenda for last Thursday. But the item was pulled from the agenda when the FCC Commissioners apparently were split 2-2 over the potential conditions that they would place on the merger. According to an AT&T filing, these potential conditions include: universal broadband availability, broadband pricing, disaster recovery capabilities, UNE rates, special access rates, naked DSL, net neutrality, and “forebearging” from asking for forbearance on UNE availability. Even this impressive list of conditions was not sufficient for at least 2 of the Commissioners from approving the merger. Interestingly, the Justice Department did not place these types of conditions on its approval of the merger.How can these two different regulators come to such totally different conclusions about this particular merger? Easy, the Justice Department is only concerned with any anticompetitive impact of the merger, while the FCC acts under a much broader (and never clearly defined) “public interest” standard. With such a broad standard, some FCC Commissioners are trying to shoehorn policy issues unrelated to the merger, such as net neutrality and broadband deployment, into the conditions. Is that what merger review should be about?Regardless of what one thinks about the proposed merger conditions, using the merger process to impose them makes no sense. If the conditions are aimed at preventing potential anticompetitive activities, then the Justice Department has clear authority to deal with any such problems in its merger review process. If the conditions are mere policy objectives, then why should they apply only to the companies that are merging? Shouldn’t they apply to all similarly situation companies? And doesn’t the FCC have a rulemaking process to make these kinds of decisions? It’s time to review the merger review process. I think that the FCC needs to get out of the merger review business. They should merely determine whether the combined entity can properly hold FCC licenses and leave questions of competition to the antitrust enforcers and questions of telecom policy to broad FCC rulemaking processes that apply to all parties.

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  1. If you want to track the status of public mergers, go to http://www.mergerinvesting.com

  2. The only good thing about regulatory hurdles is at least they’re predictable.