UPDATED: The AT&T-BellSouth proposed merger cleared its first regulatory hurdle today with a resounding thumbs up from the Department of Justice (DoJ), which unconditionally approved the $67 billion deal.
A Federal Communications Commission (FCC) approval would make AT&T the largest U.S. provider of landlines with 70 million customers in 22 states.
The FCC is scheduled to vote on the merger Thursday morning.
The combination of AT&T and BellSouth
would also create the nation’s second-largest broadband provider with 9.1 million subscribers, barely trailing Comcast’s 9.3 million customers.
The San Antonio, Texas-based AT&T and the Atlanta-based BellSouth also jointly own Cingular Wireless, the nation’s largest cellular phone service with 57.3 million subscribers.
“The Antitrust Division determined that the proposed transaction is not likely to reduce competition substantially,” Assistant Attorney General Thomas O. Barnett said in a statement.
Consumer harm in the merger between the two telephone giants is likely to be mitigated, Barnett said, by the “presence of other competitors, changing regulatory requirements and the emergence of new technologies in markets for residential local and long distance service.”
The DoJ also studied the impact of the merger on Internet competition.
“The [DoJ] found that the merger would neither significantly increase concentration in markets for the provision of broadband services to end users nor increase Internet backbone shares significantly,” the DoJ said in a statement on the merger investigation.
Even before AT&T’s March announcement of the merger with BellSouth, AT&T was the top U.S. telephone company provider of broadband with 6.5 million subscribers, leading Verizon by a million DSL customers.
BellSouth adds another 2.6 million DSL customers to AT&T’s network.
“Although the merger would increase the number of subscribers on AT&T’s broadband network, the large majority of the nation’s residential and small business ‘eyeballs’ remain with other large broadband Internet service providers, such as Verizon, Qwest, Comcast, and Time Warner,” the DoJ said.
Overall, cable companies have 17.12 million broadband subscribers while telephone companies have 14.67 million customers.
Both AT&T and BellSouth rushed to praise the DoJ decision.
“This unequivocal and unconditional approval underscores the competitive nature of our industry and the pro-competitive benefits of this merger,” James D. Ellis, AT&T’s general counsel, said in a statement.
“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.”
BellSouth added in the 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.”
Critics of the merger also quickly spoke up.
Earl Comstock, the president and CEO of CompTel, a trade association of competitive local exchange carriers, said in a statement he was deeply disappointed.
“The Department of Justice has completely abdicated its responsibility to protect the public and competition by enforcing the antitrust laws of the United States,” he said.
“There is no doubt that re-assembling the Bell system that the Reagan Justice Department broke up is anticompetitive and bad for consumers.”
Former Virginia Republican congressman Tom Bliley, who now represents the Alliance for Competition in Telecommunications (ACTel), said the DoJ acted “cavalierly.”
“The Department of Justice has abdicated its responsibility to protect American consumers from monopoly price increases, severe job cuts and harm to our economy,” Bliley said in a statement.
