The FCCs general counsel late Friday issued analysis permitting Republican commissioner Robert McDowell to vote on the pending AT&T Inc.-BellSouth Corp. merger if he so chooses.

McDowell had recused himself from the proceedings because he came to the FCC from COMPTEL, a competitive carrier association that opposes recent Bell megamergers. However, McDowell was not involved in any legal action regarding AT&T or BellSouth, one of the aspects FCC lawyer Samuel Feder considered in his decision to open the floor to McDowell.

Feder decided McDowell can participate if he likes, based on precedent set by a former chairman and because of McDowells lack of work on cases involving the two ILECs. If you feel appearance concerns outweigh the governments interest here or you have any other reason to abstain from participating, you are free to do so, Feder wrote.

McDowell responded in a statement, saying he was reviewing Feders opinion. In the meantime, he said, I strongly urge the participating parties and my four colleagues to resolve their differences in the same amicable and unified manner they did in the similar merger between SBC and AT&T just last year.”

Chairman Kevin Martin, who asked Feder to decide whether McDowell could vote, said he looked forward to pressing ahead with the $80 billion deal.

McDowells former boss, Earl Comstock, COMPTEL president and CEO, said he found Feders analysis less than compelling, adding, The memo makes clear that Commissioner McDowell is free to abstain, and that course would best ensure that no party can claim he has taken action that is biased against them. In the alternative, Commissioner McDowell could also resolve the claimed impasse which AT&T is more than capable of resolving on its own by voting to designate the issues in dispute between the other four commissioners for a hearing.

Comstock said that approach would ensure all parties get a fair hearing.

Even though McDowell is a Republican, it is not clear which way he would vote on the transaction, given his work with COMPTEL. To wit, Stifel Nicolaus analysts Blair Levin, Rebecca Arbogast and David Kaut issued a memo to clients Friday evening noting that “while Mr. McDowell’s views cannot be taken for granted and we suspect that he will seek some sort of compromise, we believe his involvement would give the two Republicans more leverage.” They added they do not think McDowell would break ranks with Martin and Commissioner Deborah Tate. They also do not expect McDowell to support wide-ranging network neutrality regulations.

Several Congressional members recently sent letters to Martin, expressing concern over the chairmans request regarding McDowells participation. Rep. Mike Doyle, D-Penn., for example, said that while he did not harbor an opinion on the merger itself, he felt unrecusing McDowell would set the commission on a treacherous course toward an unacceptable precedent. The recent November elections were, in part, about holding our government officials to the highest ethical standards. When public servants have identified and recused themselves from legitimate conflicts of interest, they should be commended for upholding the highest standards of public integrity that are required of all government appointees.

In the meantime, critics of government regulation said the FCC should not have the power to approve mergers at all. Hance Haney, a senior fellow at the Discovery Institute, a conservative think tank, blogged on Wednesday that an antitrust review at the FCC is redundant, given the Justice Departments green light for the AT&T-BellSouth deal two months ago. FCC merger reviews exist primarily for the gratification of regulatory busybodies, he said. Its time to eliminate them completely.

The FCC’s consideration of the proposed AT&T-BellSouth merger has been put on and taken off the agency’s agenda throughout the fall, as Martin tried to get all commissioners to agree on passage. The Democratic members are decrying the lack of conditions imposed on the Bells.

The companies originally announced their intent to merge in March, not long after SBC Communications swallowed AT&T Corp. and Verizon Communications Inc. took over MCI Inc. 

AT&T Inc. www.att.com
BellSouth Corp. www.bellsouth.com
COMPTEL www.comptel.org
Discovery Institute www.discovery.org
FCC www.fcc.gov
Stifel Nicolaus   www.stifel.com
Verizon Communications Inc.   www.verizon.com