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DOJ Approves AT&T-Bell South merger: more affirmation market is competitive not a duopoly

The Department of Justice Antitrust Division approved the AT&T-Bell South merger today without conditions. What this means is that the expert agency responsible for preserving competition believes the various markets these companies are engaged in are competitive: broadband data, voice, wireless and internet access.

The key quote from the DOJ announcement included below is:

  • "The proposed acquisition does not raise competition concerns with respect to Internet services markets or 'net neutrality.'

This effectively stuffs those net neutrality proponents trying to argue that there is a "broadband duopoly." 

The DOJ announcement is attached below:

From: USDOJ-Office.of.Public.Affairs@usdoj.gov
[mailto:USDOJ-Office.of.Public.Affairs@usdoj.gov]
Sent: Wednesday, October 11, 2006 10:08 AM
To: USDOJ-Office.of.Public.Affairs@usdoj.gov
Subject: STATEMENT BY ASSISTANT ATTORNEY GENERAL THOMAS O. BARNETT
REGARDING THE CLOSING OF THE INVESTIGATION OF AT&T'S ACQUISITION OF
BELLSOUTH
FOR IMMEDIATE RELEASE AT
WEDNESDAY, OCTOBER 11, 2006 (202) 514-2007
WWW.USDOJ.GOV
TDD (202) 514-1888
STATEMENT BY ASSISTANT ATTORNEY GENERAL THOMAS O. BARNETT
REGARDING THE CLOSING OF THE INVESTIGATION OF
AT&T'S ACQUISITION OF BELLSOUTH
Investigation Concludes That Combination Would Not Reduce Competition
WASHINGTON - Thomas O. Barnett, Assistant Attorney General in
charge of the Department of Justice's Antitrust Division, issued the
following statement today after the Department announced the closing of
its investigation into the proposed acquisition of BellSouth Corporation
by AT&T Inc.:
"After thoroughly investigating AT&T's proposed acquisition of
BellSouth, the Antitrust Division determined that the proposed
transaction is not likely to reduce competition substantially. The
Division investigated all areas in which the two companies currently
compete - including residential local and long distance service,
telecommunications services provided to business customers, and Internet
services - and the merger's impact on future competition for wireless
broadband services.
"The presence of other competitors, changing regulatory
requirements and the emergence of new technologies in markets for
residential local and long distance service indicate that this
transaction is not likely to harm consumer welfare. The proposed
acquisition does not raise competition concerns with respect to Internet
services markets or 'net neutrality'. The merged firm would continue to
face competition from other facilities-based rivals in the provision of
telecommunications services to business customers including local
private line services. The combination would not significantly increase
concentration in the ownership of spectrum in any geographic area or
give AT&T control over a large enough share of all spectrum suitable for
wireless broadband services to raise competitive concerns. Finally, the
merger would likely result in cost savings and other efficiencies that
should benefit consumers."
This transaction is subject to review by the Federal
Communications Commission (FCC). The Antitrust Division coordinated
with the FCC throughout its investigation.
(Background information is attached.)
###
06-692
BACKGROUND TO CLOSING OF INVESTIGATION OF AT&T'S PROPOSED ACQUISITION OF
BELLSOUTH
On March 5, 2006, AT&T Inc. and BellSouth Corporation announced
their agreement to merge in an all-stock deal valued at $67 billion.
AT&T, a Delaware corporation with headquarters in San Antonio, Texas, is
the recently combined SBC Communications Inc. and the "legacy" AT&T.
SBC is the incumbent local exchange carrier (ILEC) throughout much of
the western, southwestern and mid-western United States. The legacy
AT&T is a large provider of long distance and enterprise
telecommunications services nationwide. BellSouth, a Georgia
corporation with headquarters in Atlanta, is the ILEC throughout much of
the southeastern United States.
After an extensive investigation, the Antitrust Division
determined that the transaction is not likely to lessen competition
substantially. The Division reviewed extensive information obtained
from the merging parties and from industry participants and interviewed
dozens of industry participants, including competitors and customers of
the merging parties. The Division thoroughly examined all areas in
which the two companies currently compete-including residential local
and long distance service, telecommunications services provided to
business customers, and Internet services-and also considered the
merger's impact on future competition for wireless broadband services.
The Division also evaluated the large cost savings and other
efficiencies that AT&T has indicated it will achieve through the
transaction. The parties provided documentation indicating that much of
these efficiencies are likely to be realized, which would further reduce
the likelihood that the transaction might harm consumer welfare.
Local Private Lines
The Division's investigation focused in significant part on the
provision of local private line services to wholesale and retail
business customers. Local private lines are used to supply voice and
data telecommunications services to business customers at locations
within a metropolitan area. Because of BellSouth's extensive network,
the company can provide local private lines to virtually every building
in its region, while AT&T can provide services over its own facilities
to only a small minority of buildings. In each metropolitan area where
the two firms have significant overlapping facilities, the Division
found that, postmerger, AT&T would have several competitors with
extensive local networks. The merged firm would continue to face
existing or potential facilities-based competition at nearly all of the
buildings served by AT&T before the merger. Although the Division
required divestitures of certain local private line assets before SBC
acquired the former AT&T, applying the same criteria to this transaction
led the Division to conclude that divestitures were unnecessary to
preserve competition.
Other Telecommunications Services Provided to Business Customers
For other retail business services, the Division concluded that
the merger would not harm competition due to the presence of other
competitors, the emergence of new technologies, and the fact that the
merging parties' respective strengths are largely complementary. Within
BellSouth's territory, AT&T's strength is in serving the complex, often
nationwide needs of large businesses, while BellSouth focuses on serving
smaller firms and providing traditional voice and data services to
in-region businesses. BellSouth has very little business outside of its
region.
Residential Local and Long Distance Service
In markets for residential local and long distance service in
the BellSouth region, the Division found that AT&T was of limited and
declining competitive significance. The presence of other competitors,
changing regulatory requirements, and the emergence of new technologies,
such as voice over IP, indicate that the merger is unlikely to harm
consumers.
Internet Services
The Division also investigated whether the merger would create
competitive problems in Internet services, including "net neutrality"
concerns regarding the merged firm's ability or incentive to favor its
own Internet content over that of its rivals. The Division 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. 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).
Wireless Broadband Services
The merger is not likely substantially to lessen competition in
the provision of wireless broadband services. The combination would not
significantly increase concentration in the ownership of spectrum in any
geographic area or give AT&T control over a large enough share of
spectrum suitable for wireless broadband services to raise competitive
concerns.
The Division provides this statement under its policy of issuing
statements, in appropriate cases, concerning the closing of
investigations. This statement is limited by the Division's obligation
to protect the confidentiality of certain information obtained in its
investigations. As in most of its investigations, the Division's
evaluation has been highly fact-specific, and many of the relevant
underlying facts are not public. Consequently, readers should not draw
overly broad conclusions regarding how the Division is likely in the
future to analyze other collaborations or activities, or transactions
involving particular firms. Enforcement decisions are made on a
case-by-case basis and the analysis and conclusions discussed in this
statement do not bind the Division in any future enforcement actions.
Guidance on the Division's policy regarding closing statements is
available at: http://www.usdoj.gov/atr/public/guidelines/201888.htm.

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