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Talks move AT&T closer to deal
[December 29, 2006]

Talks move AT&T closer to deal

(Atlanta Journal-Constitution, The (KRT) Via Thomson Dialog NewsEdge) Dec. 29--AT&T appears to be edging closer to completing a $86 billion buyout of BellSouth, with Federal Communications Commission approval possible as soon as today.

The timing of the vote still could change, given that the FCC was once expected to sign off on the deal in October. But on Thursday night, AT&T and BellSouth sent a letter to the FCC offering to agree to a much broader list of conditions than previously disclosed.

The letter is a key indication that the FCC, in its talks with AT&T, has made progress on a compromise. Until now, the FCC's two Republicans and two Democrats have been deadlocked, leaving the deal's approval up in the air.

In October, AT&T said it would agree to concessions on a number of issues, such as making high-speed Internet service available to all. That, however, didn't prove enough to satisfy the FCC's Democrats.

On Thursday, AT&T and BellSouth detailed more concessions, including:

--Returning 3,000 jobs to the United States that BellSouth had outsourced overseas.

--Freezing prices on some services that rivals purchase from AT&T to resell.

--Selling, or divesting, fiber lines in 31 buildings in the Southeast so others can use them to compete with AT&T.

--Selling some wireless spectrum and, in other cases, agreeing to use spectrum or face losing it.

--Offering high-speed Internet service to customers at a cost of $19.95 per month without requiring them to buy phone service.

Even more significant was an agreement to limits on what it is known in industry shorthand as "net neutrality." In simple terms, the debate revolves around who should pay for network upgrades as Internet traffic grows.

AT&T wants the freedom to charge more to the heaviest corporate users, while some groups and companies oppose the prospect of such charges. AT&T in its letter said it won't levy charges or offer faster service to those willing to pay for it for two years. That could change, however, through action in Congress.

Thursday's news was greeted with praise by some consumer advocates who argued in favor of net neutrality.

"Making net neutrality a condition of the largest merger in telecommunications history would set an important precedent," said Ben Scott, policy director for Free Press, which has opposed the merger.

In AT&T's letter to the FCC, the company's senior vice president for federal regulatory issues, Robert Quinn Jr., said the additional concessions are meant to "break the impasse."

Assuming the changes are enough to settle the many thorny issues that surround the deal, AT&T's acquisition could go ahead as early as today. The acquisition is expected to have a sweeping impact on Atlanta and on Georgia.

BellSouth and Cingular Wireless, which AT&T also will take over in the deal, are both headquartered in Atlanta and employ thousands of people in the state.

Cingular's main office will stay in the city after the AT&T buyout, but BellSouth's operations will remain only as a regional headquarters.

Thousands of white-collar jobs could be lost in Georgia, whether through attrition or involuntary cuts. Very few changes are expected among blue-collar employees, given that AT&T's existing network has little overlap with that of BellSouth.

Those issues remain in the offing, however, as the companies wait to close the deal.

According to a person familiar with the situation, officials have worked to strike a compromise since it became clear Dec. 18 that a fifth commissioner would not break a tie. That commissioner decided not to vote, citing a conflict of interest from his previous work for a trade group that opposes the deal. Discussions among the remaining commissioners and their staffers resumed, despite the holidays.

San Antonio-based AT&T has ample incentive to push to complete the purchase before 2007, in part because the Democratic takeover of Congress could lead to more delays.

While the FCC does not have a formal meeting scheduled until Jan. 17, commissioners can approve the AT&T-BellSouth deal without such a gathering. The merger also will need a final stamp of approval by the Georgia secretary of state's office.

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