And then there were four: FCC OKs SBC/Ameritech merger

Eighteen months after the deal was first announced, the FCC has given SBC Communications and Ameritech permission to tie the knot - as long as 30 strings are attached.

Those strings are essentially the same post-merger conditions proposed last June by SBC in an effort to restore momentum to the agency's approval process: separating data and voice services, opening markets to local competition with discounts, promoting out-of-region competition by the new company and improving service in rural and low-income areas.

SBC and Ameritech can now combine into what will be - until the approval of the Bell Atlantic/ GTE merger - the nation's largest RBOC, with about $42 billion in annual revenue and almost one-third of local phone lines in the U.S.

"No proposed telecommunications industry merger that has come before this commission has been more momentous than this," said FCC Chairman William Kennard in announcing the approval order. The conditions imposed on the deal are unique because the merger is unprecedented in its size, scope and consolidating effects, he added.

For its part, SBC said it was ready to close the deal immediately. "With the FCC's approval in hand, we will move as quickly as possible so that we can begin delivering the benefits of this merger right away," a company statement said.

Ameritech officials referred all comment to SBC.

To close the merger, the new SBC must agree to operate as a competitive local exchange carrier (CLEC) in at least 30 metro markets outside its 13-state territory by early 2002. Otherwise, it will face a "voluntary incentive payment" of $1.2 billion. It also must offer sizeable discounts to CLECs wishing to compete - 25% on unbundled local loops and 32% on resold local service.

The carrier must sell any advanced services such as high-speed Internet through a separate data subsidiary. It must give each competing data LEC a 50% discount on a second loop for data services and a 25% discount on all loops until it can fill three-quarters of that CLEC's line provisioning orders via electronic operations support system interface.

In areas where the SBC data subsidiary sells DSL services, it must deploy 10% of those lines in rural or low-income markets - and report quarterly to the FCC on its DSL deployments.

Finally, the new SBC will have to supply multiple types of performance figures for its voice and data services - or face another fine of more than $1 billion.

The conditions were controversial even among the five FCC commissioners. Commissioner Harold Furchtgott-Roth voted in favor of the merger but dissented on imposing conditions, which he said grew out of "the vague sentiments of a few individuals - not even of the full commission - of what the public interest required."

But the terms seemed to mollify most independent telecom groups opposed to the merger, although many encouraged the FCC to be vigilant. Jonathan Askin, vice president for law with the Association for Local Telecommunications Services, said the joining of "two anti-competitive monopolies" would close off markets to competition without the conditions.

"I'm nervous about imposing conditions post-merger rather than before," said Stephen Wayne, a spokesman for the United Consumer Federation. "Still, they will help foster local competition - if a miracle happens and the company complies."

Among other terms of the FCC order, the merged SBC/Ameritech must:

- Set up separate high-speed data affiliates

- Offer competitors a 25% discount on unbundled local loops and 32% on resold local transport

- Accelerate high-speed data rollouts in rural and low-income markets

- File monthly state reports on 20 performance measures

- Pay up to $1 billion in fines over three years if measures fall short