FCC’s McDowell Won’t Break Tie on AT&T-BellSouth Deal

U.S. Federal Communications Commission member Robert McDowell refused to vote to break a deadlock over AT&T Inc.’s $85 billion purchase of BellSouth Corp., a new setback for the deal first announced in March.

McDowell, a Republican who sat out of negotiations because of his past work as a lobbyist, told a news conference in Washington that his participation would raise ethical concerns.

The decision is a disappointment for FCC Chairman Kevin Martin, who had been counting on McDowell’s vote to break the impasse between the two other Republican and two Democratic panel members. AT&T and BellSouth had been anticipating approval by the end of the year and the FCC sanction is the last hurdle needed.

“AT&T and BellSouth had a strategy to get this deal done that depended on his participation,” said Blair Levin, a Stifel, Nicolaus & Co. analyst in Washington. “The real negotiations will get done now.” Levin predicted an agreement may be reached next month.

Martin on Dec. 1 asked Samuel Feder, the agency’s general counsel, to decide whether it would be in the government’s interest for McDowell to cast a tiebreaking vote. Feder ruled Dec. 8 that it would be. Feder called the decision “difficult” and said his opinion didn’t compel McDowell to vote.

Shares of AT&T fell 19 cents to $35.47 at 4 p.m. in New York Stock Exchange composite trading. They have climbed 45 percent this year. BellSouth shares, up 69 percent this year, fell 72 cents to $45.78.

‘Soon as Possible’

“My four colleagues have exclusive and unambiguous ownership of this important merger,” McDowell said. “I urge all of them to resolve their differences as soon as possible.”

The panel’s Democrats, Michael Copps and Jonathan Adelstein, are demanding conditions such as price controls and airwave- license sales, moves that are being resisted by Martin and Commissioner Deborah Taylor Tate, both Republicans.

“Finally we have clarity on who will be participating in this proceeding,” Copps said today in an e-mailed statement. “That should give some juice to our ongoing discussions.”

The trade group Comptel, McDowell’s former employer, has urged the FCC to reject the BellSouth deal or impose tougher conditions than those offered by AT&T, the biggest U.S. telephone company. Washington-based Comptel represents companies that compete with San Antonio-based AT&T and BellSouth.

McDowell’s refusal to vote may also signal he won’t always side with Martin in future proceedings.

Martin said he respected McDowell’s decision to abstain.

“I will continue to try to work with my colleagues to bring our consideration of this merger to conclusion,” he said today in an e-mailed statement.

AT&T Concessions

AT&T has offered concessions including a 30-month price freeze on certain business services, $10-a-month high-speed Internet access for some BellSouth customers, and expanded broadband access in rural and low-income areas.

“We have sought the support for this merger from every member of the Commission since the very beginning and we will continue to do so,” AT&T spokesman Michael Balmoris said today in an e-mailed statement. “We will — as we have always done — do our part to bring the merger review to a bipartisan completion as quickly as possible.”

Comptel, rival companies and consumer groups want tougher conditions such as price controls for at least seven years, and a “net-neutrality” requirement that would bar AT&T from charging Web companies premium fees for faster services.

The BellSouth deal would expand AT&T’s local service area to 22 states. Atlanta-based BellSouth, the third-biggest U.S. phone company, sells local service in nine Southeastern states.

The deal also would give AT&T full ownership of Cingular Wireless LLC, the largest U.S. mobile-phone carrier. Atlanta-based Cingular is jointly owned by AT&T and BellSouth.

Click here to Molly Peterson's original article at Bloomberg.com