WASHINGTON-The commercial mobile radio services rate integration order released by the Federal
Communications Commission on New Year’s Eve could have an impact on the proposed merger between Bell Atlantic
Corp. and AirTouch Communications Inc.
Rate integration requires interstate telecommunications companies to
provide interstate long-distance services to their customers in each state, including U.S. territories, at rates no higher
than those they charge to their customers in other states.
The FCC’s “actions ensured that consumers in all 50
states and U.S. territories continue to have access to interstate, interexchange CMRS service at affordable and
nondiscriminatory rates,” said the FCC.
As talks of a possible Bell Atlantic/AirTouch merger demonstrate,
nationwide calling plans, such as those offered by AT&T Wireless Services Inc. and Nextel Communications Inc., are
becoming increasingly popular with consumers. “If I am a consumer, I am always going to want a larger local
calling area … the same is true of these wide-area plans,” said Michael Altschul, vice president and general
counsel of the Cellular Telecommunications Industry Association.
But with buckets-of-minutes plans that don’t
differentiate between local and long distance, “it just gets messier to find the long-distance charges,” said
Mary McDermott, senior vice president and chief of staff for government relations at the Personal Communications
Industry Association.
McDermott worked as vice president for legal and regulatory affairs for the United States
Telephone Association when the rate integration language was included in the Telecommunications Act of 1996. She
said it was basically a small wireline company initiative to make sure their customers in rural America had the same
access to the price competition occurring in the long-distance industry. She did not believe it should be applied to
wireless.
David A. Gross, Washington counsel for AirTouch, agrees. “The legislative history made clear that
Congress was codifying [the policy] the FCC already had in place,” Gross said.
FCC Commissioner Harold
Furchtgott-Roth approved of the decision to include wireless in the rate integration scheme, said his legal adviser,
Kevin Martin. Furchtgott-Roth, however, still is concerned the FCC’s forbearance test is too stringent. Congress
established procedures in the telecom act that allow entities to ask the FCC to “forebear” from enforcing
rules that have become moot due to competition.
Gross would not comment on how the FCC’s decision would
impact any merger that created a nationwide calling plan, but did say AirTouch was disappointed with the FCC’s
decision.
FCC Commissioner Michael Powell seemed to indicate the FCC’s decision could lead companies to game
the process. “I anticipate that CMRS carriers will just avoid the rate integration rule in ways that may end up
having a perverse effect of harming consumers living in rural, insular and offshore areas by, for example, ceasing to bill
separately for long distance or raising local rates to subsidize the integrated long-distance rates,” Powell said.
Powell voted against the decision. Powell is expected to release a more detailed statement of dissent shortly.
FCC
staff close to those who support the decision disagreed, saying a previous stay on enforcing these rules on wide-area
plans would make it impossible for carriers to game the system.
However, it might be impossible to enforce the rate
integration rules because of the lack of specifics in wide-area plans. For this reason, the FCC is expected to release a
further notice of proposed rule making on this question.
FCC staff cautioned, however, that nationwide plans had
better be just that-nationwide-including Alaska, Hawaii and the U.S. territories.
Indeed, it might have been a fear of
congressional oversight that prompted the FCC to keep its rate-integration rules in place. Sens. Daniel Inouye (D-
Hawaii) and Ted Stevens (R-Alaska) are powerful members of both the Senate Commerce Committee and the Senate
commerce, justice, state and judiciary Appropriations subcommittee.
The FCC released its rate integration order one
day after the Department of Justice said it would agree to allow AT&T Corp. to buy Tele-Communications Inc. after
the companies agreed to sell over a five-year period all interest in Sprint PCS. The proposed takeover has been
estimated at $40 billion.
TCI currently owns 23.5 percent of the stock of Sprint’s wireless phone business. Under the
terms of the settlement, the parties must transfer the Sprint PCS stock to an independent trustee before closing their
merger. The trustee then will have approximately five years to complete the sale.
The Justice Department said the
divestiture was necessary to maintain competition between AT&T and Sprint PCS. Both AT&T and Sprint PCS offer
nationwide calling.
“AT&T and TCI made clear from the start that this interest would be placed in a trust
arrangement as part of the approval process and this is exactly what this decree accomplishes,” said Jim Cicconi,
AT&T general counsel and executive vice president of government affairs and federal policy.
The FCC still must
agree to the merger before it is completed. FCC Chairman William Kennard said last week he expects the FCC to
complete its work on the merger within the next six months but hinted it would be approved when he said the merger
“has the prospect of being a very exciting transaction.”
