Cybertelecom Federal Internet Law & Policy An Educational Project

Industry: SBC

Merger SBC + AT&T = SBC => AT&T

FCC Press Release October 31, 2005 Word | Acrobat

The Federal Communications Commission today approved the mergers of SBC Communications Inc. with AT&T Corp. and Verizon Communications Inc. with MCI, Inc.

The Commission concluded that consumers will reap the rewards of the public interest benefits that will flow from these mergers. These benefits include integration of complementary networks, which will increase efficiency and provide consumers with new services and improved network performance and reliability. The mergers will create stable, reliable U.S.-owned companies that will provide improved service to government customers and benefit national defense and homeland security. In addition, the mergers will give the companies increased economies of scale and scope, which should increase their incentives and resources to engage in basic research and development. Finally, the mergers should result in substantial cost savings, which should benefit consumers throughout the country.

The Commission's analysis of the competitive effects of the mergers focused on six key services. They are:

• Special access competition: The Commission found that, in a limited number of buildings where AT&T (in SBC's territory) and MCI (in Verizon's territory) is the only competitive carrier with direct connections, the mergers could have an anticompetitive effect on wholesale special access services that are provided entirely over a single carrier's facilities. The Commission found, however, that the Consent Decrees entered into on Oct. 27 between the U. S. Department of Justice and the applicants adequately address this potential harm. The Commission further found that the mergers are not likely to result in anticompetitive effects with respect to other special access services that combine one carrier's own facilities with those of another.
• Retail enterprise competition: The Commission found that the mergers are not likely to result in anticompetitive effects for medium and large enterprise customers because these customers are sophisticated, high-volume purchasers of communications services and because a significant number of carriers will continue to compete in the market.
• Mass market competition: The Commission found that the mergers are not likely to result in anticompetitive effects for mass market customers because AT&T has ceased marketing those services and is gradually withdrawing from that market, while MCI has significantly reduced its marketing. The Commission further found that facilities-based intermodal competition, including cable VoIP and wireless services, is growing rapidly and will play an increasingly important role with respect to future mass market competition.
• Internet backbone competition: The Commission found that the mergers are not likely to result in anticompetitive effects in the Internet backbone market. It found that the mergers are not likely to cause the Internet to tip into monopoly or duopoly, or to give the merged entities the incentive or ability to tip the market to monopoly, increase prices to supra-competitive levels, or reduce service quality.
• Wholesale interexchange (long distance) competition: The Commission found that the market is likely to remain competitive after the mergers, due primarily to the presence of numerous competitive nationwide fiber networks with excess capacity.
• International competition: The Commission found that the mergers are not likely to result in anticompetitive effects for mass market, enterprise or global telecommunications customers.
• Public Interest Benefits. Among the many public interest benefits, the Commission specifically recognized the applicants' progress implementing the Commission's VoIP 911 requirements for interconnected VoIP providers.

The Commission also adopted in the Order as enforceable conditions certain voluntary commitments made by the applicants.

• The applicants committed not to seek an increase in state-approved rates for unbundled network elements (UNEs) for two years (except for rates that are subject to current appeals in specific states).
• The applicants committed to a one-time recalculation to exclude fiber-based collocation arrangements established by AT&T in SBC's region and MCI in Verizon's region in identifying wire centers in which SBC or Verizon claims there is no impairment pursuant to the UNE triggers in the Triennial Review Remand Order so that dedicated transport and/or high-capacity loops need not be unbundled.
• The applicants committed to implement a "Service Quality Measurement Plan," which will provide the Commission with quarterly performance results for interstate special access services. This commitment will terminate the earlier of 30 months and 45 days after the beginning of the first full quarter following the closing of the mergers, or the effective date of a Commission order adopting general special access performance measurement requirements.
• The applicants committed, for 30 months, not to increase the rates paid by existing in-region customers of AT&T in SBC's region or MCI in Verizon's region for wholesale DS1 and DS3 local private line services.
• SBC/AT&T and Verizon/MCI committed, for a period of 30 months, not to provide special access services to themselves, their interexchange affiliates, or each other or their affiliates, that are not generally available to other similarly situated customers.
• The applicants committed that for a period of 30 months, before they provide new or modified contract tariffed service to their own section 272(a) affiliate(s), they will certify to the Commission that they provide service pursuant to those contract tariffs to unaffiliated customers other than each other or their wireline affiliates.
• The applicants committed for a period of 30 months not to increase rates set forth in SBC's and Verizon's interstate tariffs for special access services, including contract tariffs, that they provide in their in-region territory that are on file with the Commission on the Merger Closing Dates.
• The applicants committed, for a period of three years, to maintain settlement-free peering arrangements with at least as many providers of Internet backbone services as they did in combination on the Merger Closing Dates.
• The applicants committed for a period of two years to post their peering policies on publicly accessible websites. During this two-year period, the applicants will post any revisions to their peering policies on a timely basis as they occur.
• SBC/AT&T acknowledged: (1) that the merger does not change carrier of last resort obligations imposed by the State of Alaska on interexchange services provided by Alascom; (2) that the merger will not alter statutory and regulatory geographic rate averaging and rate integration rules that apply on the merger closing date to Alascom; and (3) after the merger closing date, they will operate Alascom as a distinct, though not structurally separate, corporate entity.
• The applicants committed to provide, within 12 months of the Merger Closing Dates, DSL service to in-region customers without requiring them to also purchase circuit-switched voice telephone service. The companies will make the offering for two years from the time it is made available in a particular state.
• The applicants committed for a period of two years to conduct business in a way that comports with the Commission's Internet policy statement issued in September.
• Finally, the applicants committed to file annual certifications that they are complying with these enforceable commitments.

Action by the Commission October 31, 2005, by Memorandum Opinion and Order (FCC 05-183). Chairman Martin and Commissioner Abernathy, with Commissioners Copps and Adelstein concurring. Separate statements issued by Chairman Martin, Commissioners Abernathy, Copps, and Adelstein.

CITATION: SBC Communications Inc. and AT&T Corp. Applications for Approval of Transfer of Control, Memorandum and Order, FCC 05-183, WC Dkt. 05-65, 20 FCC Rcd. 18290 (2005)

11/17/05 FCC Releases Order on SBC/AT&T and VERIZON/MCI Mergers. Order
In re SBC Communications Inc. and AT&T Corp. Applications for Approval of Transfer of Control, WC Docket No. 05-65, Memorandum and Order (Nov. 17, 2005)
Martin Statement: Word | Acrobat
Abernathy Statement: Word | Acrobat
Copps Statement: Word | Acrobat
Adelstein Statement: Word | Acrobat

10/31/05 FCC Approves SBC/AT&T and VERIZON/MCI Mergers.
News Release: Word | Acrobat
Martin Press Statement: Word | Acrobat
Abernathy Statement: Word | Acrobat
Copps Statement: Word | Acrobat
Adelstein Statement: Word | Acrobat

• Letter of Jacquelyne Flemming, AT&T, to Marlene Dortch, Secretary, FCC, CC Docket No. 05-65, filed Dec. 10, 2008 (final compliance letter).
• 9/7/05 180-Day Clock Stopped on Consideration of Applications for Consent to Transfer of Control Filed by SBC Communications Inc. and AT&T Corp. Public Notice: Word | Acrobat
• 5/9/05 Order Adopting Second Protective Order. Word | Acrobat
• 4/18/05 Letter to SBC Communications Inc. and AT&T Corporation Requesting Additional Information. [ 1 | 2 ]
• 3/14/05 Erratum to Public Notice. Word | Acrobat
• 3/11/05 Commission Seeks Comment on Application for Consent to Transfer of Control Filed By SBC Communications Inc. and AT&T Corp. Public Notice: Word | Acrobat
• 3/10/05 Order Adopting Protective Order. Word | Acrobat

Papers

• John H. Preston, Henry B. McFarland, Stuart D. Gurrea, An Economic Analysis of the Competitive Effects of the SBC / AT&T and Verizon / MCI Mergers on the Internet Backbone Market (July 20, 2005)

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Other Regulatory

• SBC COMMUNICATIONS INC. Adopted a Consent Decree terminating an investigation into the compliance of SBC with the merger conditions under applications of Ameritech Corp., transferor, and SBC, transferee. (Dkt No. 98-141). Action by: Chief, Enforcement Bureau. Adopted: 03/19/2003 by ORDER. (DA No. 03-825). EB, FCC 3/21/03
• Roy Mark, AT&T Makes Network Neutrality Concessions, Oct. 16, 2006
• Marguerite Reardon, FCC Approves AT&T-BellSouth Merger, CNET, Dec. 29, 2006.
• SBC ADVANCED SOLUTIONS, INC. PETITION FOR INTERIM WAIVER OF SECTION 61.38, 61.58 AND 61.59 OF THE COMMISSION'S RULES. Granted SBC- ASI's Request to Withdraw its Petition for Waiver of Sections 61.58 and 61.59 of the Commission's rules, and terminated the proceeding initiated by the Petition. Action by: Deena Shetler. Adopted: 05/13/2003 by ORDER. (DA No. 03-1585). WCB, FCC 5/14/03
• SBC ADVANCED SOLUTIONS, INC. PETITION FOR INTERIM WAIVER TO FILE CONTRACT TARIFFS FOR ADVANCED SERVICES. Granted SBC-ASI's Request to Withdraw its Petition for Waiver of the Commission's rules, and terminated the proceeding initiated by the Petition. Action by: Deputy Division Chief, Pricing Policy Division, Wireline Competition Bureau. Adopted: 05/13/2003 by ORDER. (DA No. 03- 1584). WCB, FCC 5/14/03
• Released: 10/31/2002. ENFORCEMENT BUREAU SEEKS COMMENTS ON SBC COMMUNICATIONS SECTION 272 COMPLIANCE BIENNIAL AUDIT REPORT IN CC DOCKET NO. 96-150. (DA No. 02-2925). (Dkt No 96-150). Comments Due: 12/30/2002. EB FCC 11/1/02

Notes

• 2005: SBC (the Baby Bell) acquires AT&T (the long distance company) and renames itself AT&T
• SBC is the holding company of South Western Bell, Pac Bell, ASI, Cingular Wireless (SBC owned 60% in 2002)
• 2001 Prodigy Communications (SBC fully acquired Prodigy in 2001) - SBC looks for DSL boost from Prodigy –CNET  September 25, 2001; About Prodigy ("Prodigy Communications, a subsidiary of SBC Communications, is one of America's leading Internet service providers (ISPs) serving the largest number of high-speed digital subscriber line (DSL) Internet customers in the United States. Founded in 1984 as the first consumer online service, the company together with SBC has grown to serve more than 3.6 million customers.")  See also About Prodigy and SBC
• 2001 SBC enters into alliance with Yahoo! to provide branded DSL [The New AT&T 2005]
• 2000 Joint venture between SBC and Bell South creates Cingular. [The New AT&T 2005]
• 1999 SBC acquires Ameritech.  Ameritech territories included Illinois, Indiana, Michigan, Ohio, and Wisconsin.
  • Advanced Solutions Inc. (ASI) created in May 2002 as result of merger with Ameritech for the purpose of offering SBC advanced services
  • Affiliated ISPs:
  • Pacific Bell Internet,
  • SBC Internet Services,
• 1998 SBC acquires SNET [The New AT&T 2005]
• 1997 SBC acquires Pactel [The New AT&T 2005]
• 1993 SW Bell becomes SBC

• DSL
  • Lines in Service | Adoption
  • 2002Q02 - 1.7 million DSL lines (net gain of 213,000 lines, up 67% from a year ago)  SBC Investory Briefing page 6 August 13, 2002
  • 2002Q01 - 1.5 million DSL lines (net gain of 183,000 lines, 25% growth over Q04)
  • 2001Q04 - 1.3 million DSL lines (net gain of 146,000 lines)
  • 2001Q03 - 1.187 million DSL lines (net gain of 150,000 lines)
  • 2001Q02 - 1,037 million DSL lines (net gain of 83,000 lines)
  • 2001Q01 - 954 million DSL lines
  • 2000Q04 - 767 million DSL lines - SBC Reports First-Quarter Result April 18, 2002

• "In 2001, SBC reduced its DSL per-customer recurring costs by 20 percent and per-customer nonrecurring costs by 35 percent, and targeted further 30 percent reductions in both categories in 2002.  At the end of the second quarter, SBC already had achieved a 25 percent reduction in per-customer recurring costs and a 30 percent reduction in per-customer nonrecurring costs."  SBC Investory Briefing page 6 August 13, 2002

• Nationwide Data/IP Backbone
  • "Important drivers of data growth rates for the quarter were cutbacks for ISPs.  Looking at three basic transport products in the business segment - DS1s, DS3s and Private Rate Interface ISDN - ISP revenues declined 44 percent compared with the second quarter a year ago, while the medium/small business segment grew 13.4 percent and government /education / medical grew 9.7 percent.  Overall revenues for these products declined 8.6 percent, but excluding ISPs, grew 2.8 percent."  SBC Investory Briefing page 5 August 13, 2002
  • "Much of SBC's data/IP network was built out last year, and completion of in-region network connections is already a part of SBC's 2002 capital guidance."  SBC Reports First-Quarter Result April 18, 2002

Enforcement

• See Fine Related to SBC Ameritech Merger 10/2002
• FCC GRANTS FORMAL COMPLAINT; FINDS SBC IN VIOLATION OF THE SBC/AMERITECH MERGER ORDER. The FCC granted in part a complaint brought by Core Communications, Inc. and Z-Tel Communications, Inc. against SBC Communications, Inc. and its nine incumbent local exchange affiliates. News Release. News Media Contact: John R. Winston at 7450 EB. Contact John R. Winston or Suzanne Tetreault at 7450, FCC 4/17/03
• SBC COMMUNICATIONS INC. Adopted a Consent Decree terminating an investigation into the compliance of SBC with the merger conditions under applications of Ameritech Corp., transferor, and SBC, transferee. (Dkt No. 98-141). Action by: Chief, Enforcement Bureau. Adopted: 03/19/2003 by ORDER. (DA No. 03-825). EB, FCC 3/21/03
• FCC Fines SBC $3.6 Million, Internet News 5/29/02
• FCC FINES SBC COMMUNICATIONS, INC. $100,000 FOR VIOLATING ENFORCEMENT BUREAU ORDER. News Release. News Media Contact: John Winston at 7450 EB. Contact Elizabeth H. Valinoti at 9202) 1529 DOC-221615A1.doc DOC-221615A1.pdf DOC-221615A1.txt, FCC 4/15/02
• SBC COMMUNICATIONS, INC. Imposed a monetary forfeiture to SBC Communications, Inc. in the amount of $100,000 for failure to submit a sworn written response to an Enforcement Bureau letter of inquiry. Action by: the Commission. Adopted: 04/09/2002 by Forfeiture Order. (FCC No. 02-112). EB FCC-02-112A1.doc FCC-02-112A1.pdf FCC-02-112A1.txt, fcc 4/15/02

Links

• SBC Investor Briefings

Yahoo!

• SBC Yahoo DSL expands retail presence, CNET 12/5/2003
• Yahoo, SBC launch DSL service, CNET 9/13/02
• SBC Gets Cozy With Yahoo!, Newsbytes 12/28/01
• SBC snags a stake in Yahoo, CNET 12/28/01

¨SBC also continues to make good progress in its strategic alliance with Yahoo! Inc, which was announced in late 2001.  With 80 million users across the United States and more than 30 million in SBC´s regions, Yahoo! is the No. 1 destination on the Internet.  In April 2002, the dial'up version of the SBC Yahoo! service was launched in Connecticut, with launches in additional regions planned for the second quarter. The broadband version is targeted for introduction in the third quarter of this year.¨ SBC Reports First-Quarter Result April 18, 2002

News