In re AT&T Inc., WC 06-74

• Decision Date: 26 March 2007
• Docket Number: WC 06-74
• Parties: In the Matter of AT&T Inc. and BellSouth Corporation Application for Transfer of Control Commenters Abbreviation Reply Commenters Abbreviation Condition Commenters Abbreviation File No. Authorization Holder Authorization Number File No. Authorization Holder Authorization Number File No. Licensee Lead Call Sign File No. Licensee Lead Call Sign File No. Licensee Lead Call Sign File No. Licensee Lead Call Sign File No. Licensee Lead Call Sign File No. Licensee Lead Call Sign File No. Licensee Call Signs Metro Area CLLI Address City State Code
• Court: Federal Communications Commission Decisions

In the Matter of AT&T Inc. and BellSouth Corporation Application for Transfer of Control

WC No. 06-74

Federal Communications Commission

March 26, 2007

Adopted: December 29, 2006

MEMORANDUM OPINION AND ORDER

Marlene H. Dortch Secretary

By the Commission: Chairman Martin and Commissioner Tate issuing a joint statement; Commissioners Copps and Adelstein concurring and issuing separate statements; Commissioner McDowell not participating.

TABLE OF CONTENTS

Para.

I. INTRODUCTION ................................................................................................................................ 1

II. EXECUTIVE SUMMARY .................................................................................................................. 3

III. BACKGROUND .................................................................................................................................. 6

A. Description of the Applicants .................................................................................................. 6

1. BellSouth Corp. . .......................................................................................................................... 6

2. AT&T Inc. . ................................................................................................................................ 11

B. Description of the Transaction ............................................................................................. 14

C. Applications and Review Process ........................................................................................... 17

1. Commission Review .................................................................................................................. 17

2. Department of Justice Review ................................................................................................... 18

IV. STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK ........................................ 19

V. POTENTIAL PUBLIC INTEREST HARMS .................................................................................... 23

A. Analytical Framework ........................................................................................................... 23

B. Wholesale Special Access Competition ............................................................................... 27

1. Relevant Markets ....................................................................................................................... 28

2. Competitive Analysis ................................................................................................................ 34

C. Retail Enterprise Competition ............................................................................................... 62

1. Relevant Markets ....................................................................................................................... 63

2. Competitive Analysis ................................................................................................................ 71

D. Mass. Market Telecommunications Competition ................................................................ 88

1. Relevant Markets ....................................................................................................................... 89

2. Competitive Analysis .............................................................................................................. 106

E. Mass. Market High-Speed Internet Access Competition ................................................. 113

1. Relevant Markets ..................................................................................................................... 114

2. Competitive Analysis .............................................................................................................. 115

F. Internet Backbone Competition ........................................................................................... 121

1. Background .............................................................................................................................. 122

2. Relevant Markets ..................................................................................................................... 125

3. Competitive Analysis .............................................................................................................. 129

G. U.S. International Services Competition ........................................................................... 155

1. Input Markets: International Transport Market ...................................................................... 158

2. Intermediate Facilities-Based Markets .................................................................................... 162

3. End-User Markets .................................................................................................................... 170

H. Wireless Broadband Services Competition ....................................................................... 175

I. Effect of the Enlarged Local Footprint ........................................................................... 183

1. Big Footprint ........................................................................................................................... 184

2. Benchmarking .......................................................................................................................... 187

J. Qualifications to Acquire Control of BellSouth's Licenses ....................................... 190

VI. OTHER ISSUES .............................................................................................................................. 195

VII. POTENTIAL PUBLIC INTEREST BENEFITS ............................................................................. 200

A. Introduction ............................................................................................................................. 200

B. Analytical Framework ......................................................................................................... 201

C. Accelerated Broadband Deployment ................................................................................ 204

D. Benefits of Unifying Cingular's Ownership ...................................................................... 205

E. Enhancement of MVPD and Programming Competition .................................................. 207

F. Enhancements to National Security, Disaster Recovery, and Government Services ............................................... 208

G. Efficiencies Related to Vertical Integration .................................................................. 211

H. Economies of Scope and Scale .............................................................................................. 214

I. Cost Synergies ......................................................................................................................... 215

VIII.CONCLUSION ................................................................................................................................ 223

IX. ORDERING CLAUSES .................................................................................................................. 226

APPENDICES

APPENDIX A-List of Commenters

APPENDIX B-List of Licenses and Authorizations Subject to Transfer of Control

APPENDIX C-Enterprise Data

APPENDIX D-Mass Market Data

APPENDIX E-Internet Backbone Data

APPENDIX F-Conditions

I. INTRODUCTION

1. AT&T Inc. (AT&T) and BellSouth Corporation (BellSouth) (collectively, the Applicants) have filed a series of applications^[1] pursuant to sections 214 and 310(d) of the Communications Act of 1934, as amended (Communications Act or Act)^[2] and section 2 of the Cable Landing License Act^[3] in connection with their proposed merger. This merger would combine two regional Bell Operating Companies (BOCs). AT&T and BellSouth offer competing services in certain communications markets, and BellSouth supplies wholesale inputs relied upon by AT&T and other competitors in various retail markets. Thus, the proposed merger requires us to examine its effects on competition – which are both horizontal and vertical in nature – in a wide range of significant communications markets.

2. In accordance with the terms of sections 214(a) and 310(d), we must determine whether the Applicants have demonstrated that the proposed transfers would serve the public interest, convenience, and necessity.^[4] Based on the record before us, and as discussed more fully below, we find that the transaction meets this standard. After analyzing the record, we conclude that this merger may reduce from two to one the number of competitors with direct connections to a handful of buildings where other competitive entry is unlikely. We further find, however, that AT&T's voluntary commitment to divest at least eight fiber strands in the form of ten-year IRUs for these two-to-one buildings where entry is unlikely adequately remedies these potential harms.^[5] Moreover, to the extent that the merger increases concentration in those or other relevant markets, we find that the public interest benefits of the merger outweigh any potential public interest harms.

II. EXECUTIVE SUMMARY

3. As discussed below, our analysis of the competitive effects of the merger, which focuses on the following key services, finds that the merger is not likely, with one exception, to result in anticompetitive effects in relevant markets.

• Special access competition. The record indicates that, in a small number of buildings in the BellSouth in-region territory where AT&T and BellSouth are the only carriers with direct connections, and where other competitive entry is unlikely, the merger is likely to have an anticompetitive effect

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