FCC's two Democratic members harshly criticized the Justice Department for approving the $78 billion AT&T- BellSouth merger without conditions.
The department, however, said Wednesday that "the presence of other competitors, changing regulatory requirements and the emergence of new technologies" prompted its decision.
The Justice Department's decision came a day before the FCC was scheduled to vote on the merger at a public meeting. But consideration of that matter was later postponed until at least this Friday.
Sources said that much work is left in the negotiations and that further delays might be unavoidable.
"The Justice Department has packed its bags and walked out on consumers and small businesses by refusing to impose even a single condition in the largest telecom merger the nation has ever seen," FCC Commissioner Michael Copps complained in a statement.
Because the Justice Department did not issue a consent decree, or a settlement with the parties, a combined AT&T-BellSouth would not be subject to an automatic judicial review.
"This abdication looks suspiciously like an end-run around the public interest review" required under antitrust law, Copps charged.
His views were echoed by the FCC's other Democratic member, Commissioner Jonathan Adelstein, who issued a statement characterizing the department's conclusions as "a reckless abandonment of [Justice's] responsibility to protect competition and consumers."
But a department official said,"We found that there was not a substantial lessening of competition in any market" under the deal.
Because there are no antitrust violations, no consent decree is needed, he said.
For their part, the merger parties said the ruling underscores how the deal would result in improved services and more offerings.
"AT&T is focused on bringing more video choices and next-generation broadband services to as many consumers as possible, and our merger with BellSouth will help deliver these benefits to more consumers, more quickly," AT&T General Counsel James Ellis said in a statement.
He added, "This unequivocal and unconditional approval underscores the competitive nature of our industry and the pro-competitive benefits of this merger."
BellSouth said in its statement, "This merger will create a communications industry leader capable of providing customers across the BellSouth region with the latest in wireline, wireless, broadband and video technologies and innovation."
But, at an FCC meeting Thursday, Copps said the Justice Department decision has placed added pressure on him and Adelstein to secure consumer protections.
"We really didn't have the terrain defined for us until yesterday when the Department of Justice kind of abdicated their responsibility," Copps said.
Sources said the conditions the Democrats are seeking include so-called network neutrality restrictions that would bar the merged company from potentially blocking or degrading competing Internet content on their high-speed lines.
However, if the Democrats push too far, FCC Chairman Kevin Martin, a Republican, might include fellow Republican Commissioner Robert McDowell in the negotiations, giving the Republicans a 3-2 advantage. Without McDowell, the parties are split 2-2.
McDowell may be recused due to his background at CompTel, which represents Bell competitors. But sources noted that Martin has the authority to involve McDowell if the talks with Democrats reach an impasse.
Further complicating matters, Martin has a business trip to Asia scheduled for Oct. 14-24, though the dates could change, sources said.
"This is extremely troubling news for consumers," said Jeannine Kenney, a senior policy analyst at Consumers Union, said of the Justice Department decision.
She contended that the department has essentially "rubber-stamped" the deal and is overstating the level of competition in the telephone market.
Leading Democrats in Congress also slammed the decision.
"By approving the merger without any conditions, the administration is avoiding court review, ignoring Congress and protecting big business at consumers' expense," Sen. Patrick Leahy of Vermont, the senior Democrat on the House Judiciary Committee, wrote.
"Congress must be vigilant -- if the Bush administration will not be -- to protect consumers from anti-competitive actions and attempts at re-monopolization," declared Leahy.
"Now, more than ever, it will be essential for the FCC to stand up for consumers," added Sen. Daniel Inouye of Hawaii, the senior Democrat on the Senate Commerce panel.
Massachusetts Rep. Edward Markey, the lead Democrat on the House Energy and Commerce Telecommunications and the Internet Subcommittee, likened the Justice Department's Antitrust Division to fictional character Rip Van Winkle for being in the "deep throes of a multiyear slumber."And House Energy and Commerce ranking member John Dingell, D-Mich., complained in a letter to Martin that the Justice Department had made its announcement before a judicial review of two previous telecom mergers is complete.
Dingell also asserted that the department has "ignored the competitive harms" raised by previous mergers and reminded Martin that the FCC previously has surpassed the conditions set by the Justice Department.
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