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FCC Staff Mulls SBC-Ameritech Merger

May 6, 1999

WASHINGTON (AP) _ Consumers and competition must be protected before SBC Communications and Ameritech are allowed to merge into the nation’s largest local phone company, a top FCC official said Thursday.

Federal Communications Commission staff opened a two-day hearing Thursday on what possible conditions could be placed on the $57 billion merger to satisfy their concerns.

Thomas Krattenmaker, who is leading the staff review, believes that the companies, whose local phone territories abut, _ probably would eliminate their biggest potential competitor _ each other _ by merging.

Staff members also raised concerns that an SBC-Ameritech would be so powerful it would discourage other companies from invading the merged companies 13-state local phone territory to provide competing services.

SBC and Ameritech attorneys rejected both concerns, contending that the merger would benefit consumers and competition. The companies, they said, must merge to become more efficient and financially able to do business in markets outside their region, which they said the companies cannot do separately.

The companies also need to merge to become major players in the global telecommunications market, the attorneys said. AT&T and other rivals are merging for the same reasons, they added.

``This merger is about growth,″ said Ameritech’s counsel, Richard Hetke.

But Krattenmaker said FCC staff members are looking into possible conditions because they had tentatively concluded that the merger ``flunks the public interest test.″

``The current mission ... is to devise conditions that can transform the merger to one that is on balance beneficial,″ Krattenmaker added.

The FCC’s five commissioners hope to make a decision this summer on the $57 billion merger, which has been approved by the Justice Department. The merger must be supported by at least three FCC commissioners to be approved.

Chairman Bill Kennard indicated he would like to see the deal move forward, saying he has asked the agency’s staff to continue work on ``a set of conditions designed to address the public interest concerns.″

Attorneys for SBC and Ameritech said their companies don’t believe any conditions are warranted but indicated they are willing to make some concessions.

Robert Atkinson, another key figure in the FCC’s review, said the commission staff had three goals to guide possible conditions:

_Ensure a combined SBC-Ameritech aggressively competes outside its 13-state local region, particularly for residential and small business customers, who now have little choice of local providers.

_Ensure other companies that own their own telecommunications networks can compete inside the combined company’s 13-state region.

_Hold SBC and Ameritech to any commitments they make.

SBC and Ameritech, supported by major telephone unions, say the merger will spur local phone competition and possibly lower prices, accelerate the roll-out of high-speed Internet access and data services and create jobs.

Consumer groups, AT&T, MCI WorldCom, Sprint and others want the FCC to block the merger, contending it would thwart local phone competition and the prospect of lower prices.

The 13 states involved in the proposed merger are Arkansas, California, Connecticut, Kansas, Missouri, Nevada, Oklahoma, Texas, Illinois, Indiana, Michigan, Ohio and Wisconsin.

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