AT&T Merger Vote Fri. Appears Increasingly Unlikely

“AT&T’s strategy is becoming clear,” said a merger opponent: “AT&T is a pretty powerful force in this town and they're going to bring the full weight of pressure down on [McDowell]. They actually need the Democrats to refuse to vote on this deal.” The source predicted AT&T will apply pressure on McDowell to agree to vote on the merger: “They're doing that in the Administration. They're doing it on the Hill… AT&T’s strategy this week is going to be very simple -- paint the Democrats as obstructionists. Create the idea in everybody’s mind that it’s the Democrats fault that this merger has not been voted yet.”

An AT&T source noted that the company has worked hard to build momentum for the merger with support from Democrats as well as Republicans. Asked about a Fri. vote, AT&T Senior Vp Robert Quinn said at an Oct. 20 press conference: “I'm an optimist and reasonable people can always find reasonable ways to compromise.”

But AT&T and BellSouth have taken a rigid stance in recent days against compromise on such issues as the sell off of the companies’ 2.3 GHz or 2.5 GHz spectrum (CD Oct 31 p1). In a letter to the FCC filed just before the Sunshine notice was released on Fri., AT&T and BellSouth highlighted the dozens of letters from members of Congress and governors, as well as other local and state officials, who have endorsed the merger.

“While competitors continue to clamor for handouts, and while inside-the-Beltway interest groups continue to press their own narrow and misguided policy agendas, none of their proposals is remotely related to any real merger-specific harm, which is reason enough to reject them under the Commission’s settled precedents,” the letter argued: “And none is supported by anything other than bald, recycled rhetoric rooted in a world view that is at least a decade old and has no relevance in today’s regulatory and competitive environment.”

AT&T has on staff heavyweights who would be able to bring pressure through the White House and Congress on McDowell to vote on the merger, should the FCC’s gen. counsel lift a recusal, sources said. Foremost among them is James Cicconi, former aide to President Reagan and deputy chief of staff in the first Bush White House, and Tim McKone, who has ties to President Bush and other top Republicans, including Sen. McCain (R-Ariz.).

“AT&T is SBC and SBC is used to not giving up and [to] throwing their weight around,” said a regulatory attorney: “They play hardball.” Several sources said one reason Chmn. Martin likely put other items on Fri.’s agenda was so the Commission could still hold a meeting even if the merger vote remains split.

“Everyone is sort of jockeying for position right now and feeling the other side out. It’s early in the process,” said a 2nd attorney, who’s working against the merger. “But as for bringing McDowell on board, it’s not a simple thing. It depends on when you want to get the merger done because if they bring him on board they have to get him up to speed… If he gets involved, this merger is off for a while.”

The strategy to force McDowell to vote is ill-advised, for practical and ethical reasons, said a longtime D.C. telecom player. “It’s not just ‘wham, bam, McDowell’s un- recused,'” he said, noting that a very detailed, public justification from the gen. counsel would be required to move him back onto the case -- a process that could take “well into December.” There would also be ethical concerns for McDowell himself, the source said.