Regulatory News – FCC, Bells Agree on Merger Conditions

Posted: 08/1999

FCC, Bells Agree on Merger Conditions
By Kim Sunderland

Federal Communications Commission (FCC) staff has reached agreement with SBC
Communications Inc., San Antonio, and Ameritech Corp., Hoffman Estates, Ill., that 28
conditions be placed on the Bell companies’ proposed merger. The full commission plans to
put out the conditions for public comment, with a ruling on the pending merger expected
possibly this fall.

"The Common Carrier Bureau’s merger review team has reported to me that they have
completed discussions with SBC and Ameritech concerning conditions which mitigate the
public interest concerns associated with their proposed merger," FCC Chairman William
E. Kennard said during a press briefing June 29. "The staff team has indicated that
they expect to recommend to the commission that the merger should be approved with the
proposed conditions, subject to review of the proposal and the comments and reply comments
from interested parties."

The package requires that the combined SBC-Ameritech discount resold local service and
offer full access to its operations support systems (OSSs). It also requires faster
new-market entry so that the company will compete in 30 new markets within 30 months after
the merger closes. SBC-Ameritech also must establish a separate subsidiary to provide
advanced services, and cannot charge residential customers minimum monthly long distance
fees for at least three years after it enters the long distance market, according to the
companies. The conditions also require performance monitoring, as well as reporting and
enforcement provisions.

"This merger puts consumers first," SBC Chairman and CEO Edward E. Whitacre
Jr. said in a statement June 29. "And through these conditions, we’re putting that
commitment in writing."

It’s taken about three months of negotiations to get to this point. Discussions began
in April in response to a letter from Chairman Kennard to the chief executives of both
Ameritech and SBC. Kennard had expressed concerns that the proposed merger wasn’t in the
public interest. Richard C. Notebaert, chairman and CEO of Ameritech, says Kennard’s
concerns now have been satisfied. "Our companies have gone through an unprecedented
and exhaustive level of review," he said. "The net result is a set of conditions
that are reasonable and fair for consumers, for competitors and for the companies."

According to an FCC staff summary, some of the other required conditions are that a
combined SBC-Ameritech:

* Create a new separate affiliate to provide advanced services, such as asymmetric
digital subscriber line (ADSL), high-speed DSL (xDSL) and frame relay in the SBC-Ameritech
region. In providing services to the affiliate, the SBC-Ameritech telephone companies will
treat the affiliate as they would any competitor. In addition, the combined company will
offer temporary loop discounts for competitive local exchange carriers (CLECs) that
provide data transmission services pending the development of new OSS interfaces for
advanced services.

* Develop and deploy common electronic OSS for preordering and ordering xDSL and other
advanced services to be used by competitors and its new advanced services affiliate.

* Before the merger closes, SBC and Ameritech will file a tariff or offer to amend
their interconnection agreements in all 13 states to demonstrate compliance with the FCC’s
collocation requirements.

* Offer the unbundled network element (UNE) platform for residential service in the
SBC-Ameritech states for a specific period regardless of the outcome of the FCC’s UNE
remand proceeding. State-specific caps limit the number of UNE platform lines that must be
provided.

* Improve residential phone service.

"I’m encouraged by SBC and Ameritech’s commitment to open their markets to
competition," Kennard said, "and their agreement to suffer stiff penalties if
they do not."