AT&T to phase out Cingular brand

AT&T will begin to extinguish next week the brand of cell phone operator Cingular, built up with billions of dollars over a few years, to imprint its more-than-century-old name firmly across its services.

AT&T, which took full control of No. 1 U.S. mobile carrier Cingular with its $86 billion purchase of BellSouth last month, will launch on Monday a campaign to mark the change.

“We did not enter that decision lightly,” Wendy Clark, vice president of advertising at AT&T, said in an interview. “We came to understand that consumer customers and business customers alike are looking for a single provider. We heard it so consistently across the marketplace.”

In its first stage, Cingular will share its orange logo of a bouncing jack with the AT&T globe logo on everything from television ads to sales uniforms and monthly bills.

AT&T ‘s name and logo will eventually replace Cingular in a process expected to take several months, with the exact timing determined as more customer feedback comes in, Clark said.

But with its long and complicated history, AT&T may face customer confusion over its name, marketing experts said. Also, Cingular built up a reputation among younger customers who may not easily associate with the AT&T brand.

At stake are AT&T ‘s efforts to promote its bundle of phone, Internet and video services against a growing number of rivals, including cable operators and Web providers.

One new ad will portray a familiar Cingular image–grain harvesters mowing a field to represent “bars” showing maximum cell phone reception. But in a new take, the harversters will change direction and mow the AT&T globe out of the stalks.

“It’s a tough proposition,” said Hayes Roth, chief marketing officer at brand agency Landor Associates. “Multiple brands within any company is expensive. Arguably they don’t have much choice, they’ve made a stand now that they’ve invested back in the core brand.”

Cingular spent nearly $1 billion on media advertising in the first nine months of 2006, up from about $920 million in the same period during 2005, according to the latest data from tracking firm TNS Media Intelligence.

For the remainder of their businesses, AT&T spent nearly $600 million on media ads in the nine-month period, while BellSouth spent just over $100 million, TNS said.

AT&T has said about 20 percent of operating cost savings in the BellSouth merger will come from lower advertising costs.

The new AT&T was formed in the merger of SBC Communications and AT&T in late 2005. Adding to the mix, in late 2004 Cingular bought AT&T Wireless, eradicating that brand for its poor reputation among customers.

“The good news is there is a difference between AT&T and AT&T Wireless,” Clark said. “We have benefited significantly…by having 12 months under our belt as the new AT&T.”

AT&T / BellSouth Merger Approved by FCC

After AT&T’s offer late yesterday of expanded concessions, including some that would guarantee neutrality in its network and routing pricing arrangements, the US Federal Communications Commission voted to approve the merger of AT&T Inc. and BellSouth, the former Regional Bell Operating Company (RBOC) that was spun off from AT&T Corp. in 1984.

As a result of this merger, none of the RBOC entities formed after the original AT&T Corp. breakup remain in their post-breakup form. The names Pacific Telesis, US West, Southwestern Bell, Ameritech, NYNEX, Bell Atlantic, and soon BellSouth will be relegated to history.

FCC commissioners were apparently impressed enough by AT&T’s promise this morning that the merged entity would provide broadband Internet service to 100% of the current BellSouth service region during 2007, including a promise within twelve months of the merger’s close (which could be next spring) to provide ADSL service at up to 768 Kbps (though many might not consider that “broadband”) as a stand-alone, non-bundled offering to the BellSouth region for $19.95 per month. No word on whether such prices will be extended to the former Ameritech, SBC, or PacTel service areas.

Another effect of the merger is that Cingular Wireless will now be a wholly-owned subsidiary of a single company, now that its two joint founders will be one.

Despite earlier skepticism from two FCC commissioners over possible anti-competitive effects from the merger, it appears the notion that “one less competitor means more room for everyone else” ruled the day. With regard to competition for retail enterprise customers, the FCC stated this afternoon, “The Commission found that competition for medium and large enterprise customers should remain strong after the merger because medium and large enterprise customers are sophisticated, high-volume purchasers of communications services and because there will remain a significant number of carriers competing in the market.”

But in an argument that may still raise some eyebrows…then lower them, then raise them again, the FCC statement actually said the merger won’t have a negative impact on the voice communications market, because neither merger partner is a major player in the global voice telecom market anyway – only within their relegated region, which just happens to be most of the US.

“The Commission found that neither BellSouth nor AT&T is a significant presence or potential participant in this market outside of their respective regions,” reads this afternoon’s FCC statement. “Consequently, the Commission found that neither party was exerting significant competitive pressure on the other in their respective in-region territories.”

Late yesterday, a letter from AT&T senior vice president Robert W. Quinn, Jr., made public by the FCC this morning, indicated the merger partners are clearly making these concessions begrudgingly, along with other concessions and promises made last October. At that time, Quinn wrote, “we emphasized our belief that these commitments were wholly unnecessary in light of the demonstrated substantial public interest benefits of the merger and the lack of any cognizable harm to competition. We noted that this belief was shared by the Dept. of Justice, nineteen states, and three foreign countries, all of which subjected the merger to exacting scrutiny and found no anticompetitive effects.”

Whether Quinn’s claim of exacting scrutiny on the part of the Justice Dept. is correct may be the subject of scrutiny in its own right after the holidays, when the matter is likely to come up before a post-Democratic-upheaval reoriented Congress. There, lawmakers are considering whether the DOJ bypassed new rules mandating judicial review of its concerns about the merger, by simply having no concerns about it whatsoever.

As promised, FCC commissioner Robert McDowell abstained from today’s vote, citing possible conflict of interest. However, his office issued a statement immediately thereafter: “I am delighted that my colleagues and the merging companies were able to come to terms so quickly after last week’s announcement,” McDowell wrote. “The shareholders, employees and customers of the new combined company all stand to benefit from the Commission’s thoughtful and prompt action. Congratulations to all.”

AT&T Merger: FCC Comm. Won’t Vote

In a short but impassioned public statement this afternoon, the likes of which has rarely been seen in Washington for decades, FCC Commissioner Robert M. McDowell boldly reiterated his refusal to vote in the current debate over the AT&T/BellSouth merger, citing his former involvement with a legal advocacy group opposed to the merger, and at times quoting the pillars of American ethical jurisprudence.

“While I expected the legal equivalent of body armor,” McDowell pronounced emphatically, referring to a memorandum from the Federal Communications Commission’s general counsel, Sam Feder, authorizing him to vote despite possible conflict of interest, “I was handed Swiss cheese.”

The entire speech was that riveting. As McDowell explained in detail, he had been nominated by President Bush last February to fill a vacancy on the FCC, left when Kevin Martin ascended to the chairman’s position following Michael Powell’s departure. Prior to that time, McDowell served as general counsel to the CompTel trade organization, which not only represents smaller telecom companies, but which has been solidly opposed to AT&T/BellSouth. That merger had already been announced at the time of McDowell’s nomination, so the subject of his stance on the merger became a prime topic during his confirmation hearings before the Senate.

Having consulted with the FCC’s Office of General Counsel at the time, he was advised in writing that he should immediately resign his position with CompTel, and for a period of one year disqualify himself from all proceedings in which CompTel, or anyone represented by CompTel, was a party.

“In effect, from the beginning, I have had a ‘red light’ prohibiting me from participating in particular matters involving specific parties – in this case, a merger proceeding involving two parties, AT&T and BellSouth – where CompTel is a party,” stated McDowell. “In light of this bar, I therefore have not participated in its substantive consideration.”

“Against this backdrop, on December 1, 2006,” he continued, “citing my four colleagues’ ‘inability to reach consensus on this matter,’ Chairman Martin announced his decision to exercise his prerogative to direct the FCC’s General Counsel to ‘consider whether the Government’s interest would be served by’ permitting me to participate.”

Last December 8, Feder produced his memorandum, which cited US Code in stating that an FCC employee may be directed to participate, despite the appearance of conflict of interest, “the interest of the Government in the employee’s participation outweighs the concern that a reasonable person may question the integrity of the agency’s programs and operations.”

But Feder’s language in commenting on that portion of US Code showed a certain reticence.

“Balancing these competing concerns here was difficult,” Feder wrote, “and reasonable people looking at these facts could disagree about the appropriate result. However, on balance…I find that you should not be barred from participating in this proceeding if you choose to do so.”

The “if’s” in Feder’s language left considerable holes in the legal argument, which McDowell – an accomplished attorney, obviously -drove a truck straight through.

“In all candor…I had expected a memorandum making a strong and clear case for my participation,” he enunciated. “Instead, the Authorization Memo is hesitant, does not acknowledge crucial facts and analyses, and concludes by framing this matter as an ethical coin-toss frozen in mid-air. The document does not provide me with confidence or comfort. Nor does the December 11, 2006, letter responding to the questions posed by Representatives Dingell and Markey [of the House Energy and Commerce Committee].”

Feder’s memo, McDowell pointed out, didn’t even raise the issue of his earlier commitment to disqualify himself from certain proceedings for one year – a commitment which, he made clear, became a promise to the US Senate in exchange for its blessing upon his nomination.

“Senators relied on these representations when they confirmed me unanimously on May 26,” he said. “Yet, the Authorization Memo offers no discussion of, let alone justification for, why or how the Ethics Agreement may be breached.”

Late last week and over the weekend, McDowell sought legal advice from a number of reputable sources, including the Virginia State Bar. None could sway his decision, nor his stance – in fact, they probably reinforced it.

In a statement that sounded ominously like it could have been a resignation, McDowell went on: “Throughout my brief tenure here at the FCC, I have tried to be as thoughtful, transparent and direct as possible in my decision making. With each decision I make, I endeavor to keep in mind why the FCC exists and what the mission of each commissioner should be; and that, of course, is to promote and protect the public interest. We must never lose sight of the fact that the ultimate shareholders in every endeavor we embark upon are the American people. In this vein, it is incumbent upon every public servant to do all that he or she can to earn the public’s trust in the integrity and impartiality of their government.”

“In light of these factors,” he continued, “I find that I have no choice but to abide by the terms of my Ethics Agreement, heed the independent advice of OGE and my personal ethics counsel, and, ultimately to follow my own personal sense of ethics. Accordingly, I disqualify myself from this matter.”

Tossing the ball into the court of the four remaining FCC commissioners – if not kicking it there as though it were the fourth quarter with two seconds left from the 50-yard line, and with a two-point deficit – McDowell slowly and distinctly urged them to come to a reasonable compromise.

“Because I am an incurable optimist,” he pronounced, citing the spirit of the holiday season, “I am confident that this merger can be resolved with the same speed and unanimity as the SBC/AT&T and Verizon/MCI mergers of last year.

“Now, my four colleagues have exclusive and unambiguous ownership of this important merger. Having only four Commissioners participate really should not be an impediment to progress. There have been many stretches of time in recent history when only four Commissioners sat on the FCC. In fact, since 1990, the Commission has had fewer than five Commissioners for a combined period of over five years. During these periods, contentious and difficult mergers were successfully considered. And, the two Bell mergers reviewed just last year were approved unanimously by a four-member Commission. This transaction should be no different. I urge all of them to resolve their differences as soon as possible.”

At a period of time when Democrats in Washington are stealing the spotlight, one Republican today may have caught the attention of John McCain and Rudy Guiliani.

Immediately afterward, McDowell’s former employer, CompTel CEO Earl Comstock, issued a statement: “Now that this matter has been resolved, COMPTEL hopes that AT&T will finally engage in forthright negotiations on conditions to address the serious competitive harms raised by this merger,” Comstock wrote. “It is time to make a decision on this transaction. Whether it is approved or is denied is now largely a function of AT&T’s willingness to address the legitimate public interest concerns raised by the largest telecom merger in history. We should know soon whether AT&T is serious about this merger or not.”

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Could Big Telecom Mergers Be Undone?

The once-certain merger process between the largest US telephone company, AT&T Inc., and former “baby Bell” and regional telephone carrier BellSouth, could perhaps be delayed further on account of a curious federal district judge. His hearings into why the AT&T/SBC and Verizon/MCI mergers were expedited by the Justice Dept. could raise skepticism about the viability of AT&T/BellSouth.

In a filing in US District Court yesterday, covered brilliantly by Anne Broache of CNET, attorneys for the Justice Dept. defended themselves against allegations that they slacked off on their reviews of the legality and competitive implications of the Verizon/MCI and AT&T/SBC mergers of 2005.

The filing apparently devoted most of its space to denouncing the allegations of citizens’ rights groups whose opinions District Judge Emmet Sullivan had extended the proceedings in order to receive. However, it appears to have sidestepped a key issue which Sullivan apparently hasn’t missed, and which may become another sticking point in the merger proceedings between AT&T and BellSouth.

At issue is a 2004 change to the Tunney Act, a part of federal law which was passed in 1974 to compel federal courts to certify that pending mergers were conducted in the public interest. In the wake of anti-monopoly proceedings against Microsoft in 2001, lawmakers began reviewing the language of the Act, and three years later passed an “amendment.”

The amendment was literally a single word. The value of this word could very well be over $80 billion USD as the AT&T/BellSouth merger resumes the scrutiny it nearly skirted.

As the law was originally phrased, “Before entering any consent judgment proposed by the United States under this section, the court may determine that the entry of such judgment is in the public interest.” This means, after the Justice Dept. passes what’s called a consent decree – an advisory stating the conditions under which the DOJ would approve the merger, assuming it is approved – the court has the right to review that decree to make certain the DOJ is acting in the public interest.

The 2004 amendment replaced “may” in the above sentence with “shall,” meaning the courts must review the consent decree rather than wave it on, sight unseen.

Taking the amendment quite literally, Judge Sullivan has continued his extensive review of the consent decrees in the AT&T/SBC and Verizon/MCI mergers, declaring as recently as November 30 that Verizon/MCI has not actually been validated, and is thus still pending.

“You say it’s a done deal, a fait accompli,” Reuters and CNET quote the judge as having told attorneys for what they thought were merged parties. “The merger’s not finished, either. The merger has not been approved by this court.”

The judge’s extended review, which has been going on since last July, is being scrutinized for possibly having triggered the Justice Dept. to find a way to avoid a similar situation with AT&T/BellSouth. Though the amended Tunney Act states the court shall review the consent decree for a merger, it presumes that one exists.

A consent decree implies that the DOJ lays out conditions for the merger to proceed. Last October, the DOJ issued a press release stating it had approved the AT&T/BellSouth merger, and that it could go forward. In so doing, it took the unprecedented step of not issuing any consent decree at all, giving Judge Sullivan – who would have inevitably reviewed it – nothing to review.

That fact has caught the attention of incoming House Energy and Commerce Committee Chairman Rep. John Dingell (D – Mich.), who promised last month, almost immediately following the sweeping Democratic victories in the last mid-term election, to open up hearings into AT&T/BellSouth. Conceivably, those hearings could now be broadened to encompass the whole proverbial can of worms, examining the process by which the DOJ’s approval of the last two telecom mergers was apparently accelerated.

This news comes as the Justice Dept. seeks to overhaul its own processes, in the interest of accelerating merger reviews even further. In its latest draft amendments to the 2001 Merger Review Process Initiative, the DOJ proposes changing its order of business in order to quickly set aside affairs that it would deem unimportant or unworthy of investigation, tapering the initial fact-finding period following the merger parties’ so-called Hart-Scott-Rodino notification to the SEC, to as little as two weeks.

“The staff is encouraged to be as aggressive as possible during the initial 15- or 30-day waiting period in attempting to identify transactions that do not require further investigation,” reads the current draft, “and to narrow and refine issues for transactions likely to progress to HSR second request inquiries.”

The DOJ is free to amend its own practices, probably without judicial review; but if congressional hearings into antitrust matters convene next month, and if their purview is extended to cover telecom mergers that even stockholders may have thought already happened, matters such as why the DOJ is keen on expediting the triage process for public interest matters, may take the spotlight.

FCC official mum on AT&T-BellSouth merger

WASHINGTON–A Federal Communications Commission official who may hold the deciding vote on a pending merger between AT&T and BellSouth declined to say Wednesday whether he plans to participate in the process.

Analysts scrutinizing the deal’s progression have speculated that Republican Commissioner Robert McDowell would recuse himself from the decision on whether to approve the controversial $80 billion deal. McDowell spent seven years as an executive with the trade association Comptel, which lobbies for competitors of the Bell telephone companies, before assuming the FCC post six months ago. But now that the FCC has thrice postponed its vote because the remaining two Democrats and two Republicans are reportedly at an impasse on conditions for the deal, some have said he may be forced to weigh in.

Following a luncheon speech at an event hosted here by the Federal Communication Bar Association, McDowell told reporters he had “no news” to report on the deal. The U.S. Department of Justice gave its unconditional blessing to the melding of the telecommunications giants in October.

As for how the agency plans to handle the hot button issue of Net neutrality, McDowell also had nothing new to offer Wednesday. Proponents of the concept, which include Google, eBay and a number of consumer advocacy groups, would like to see Congress pass new laws prohibiting network operators from charging Internet content companies extra fees for premium delivery. Telephone and cable companies have said they need the option of using such a business model to recoup investments in new broadband infrastructure.

“We’re going to collect more data and study the marketplace,” he told CNET News.com.

Letting the marketplace trump government regulation was a recurrent theme in McDowell’s 11-minute speech to representatives from communications companies–including AT&T and Verizon–and law practices. Sometimes government must step in to address market failures, he said, but those actions must be “narrowly tailored and sunsetted.”

McDowell did, however, issue a vague warning to companies contemplating interference with consumers’ ability to access and upload content as they please. “Those who act to frustrate this new wave of democracy do so at their own peril,” he said.

The speech was light-hearted at times–“fluffy chitchat,” as McDowell described it–as the lawyer-turned-commissioner cracked jokes about regulatory filings that only fellow communications attorneys could appreciate. When asked by an audience member how the FCC’s policymaking would be influenced by the new Democratic majority in Congress, he quipped, “I’d written about that in my speech and included a joke that my staff made me take out.”

When the crowd’s laughter died down, the Republican appointee regrouped with a stock answer: “We will continue to march forward, and we’ll keep the dialogue going.”

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AT&T-BellSouth Merger Vote Delayed For Third Time

The Federal Communications Commission on Thursday delayed for a third time a vote on whether to allow AT&T to acquire BellSouth–a postponement that’s due to the commissioners’ inability to agree on conditions of the deal.

The vote was scheduled for Friday during the commission’s open meeting. But the agency sent a notice late Thursday removing the item from the agenda.

The merger, which is valued at roughly $80 billion, was unconditionally approved by the antitrust division of the U.S. Department of Justice last month. The FCC approval is the last regulatory hurdle the merger must overcome before the deal closes.

Before the last scheduled FCC vote on Oct. 13, the two Democratic commissioners, Jonathan Adelstein and Michael Copps, were outraged that the Department of Justice hadn’t imposed any conditions on the merger. In an effort to win their votes, AT&T submitted a new proposal to the FCC prior to the scheduled meeting.

The vote was postponed when the Democratic commissioners asked for more time to consider the proposal. They also wanted it to be available to the public for comment.

After three weeks of public comments being submitted, it appears the commission is still deadlocked on the issue of the merger. Now, the fifth member of the commission, Republican Robert McDowell, will likely be forced to vote on the deal, several telecom experts have predicted. McDowell had recused himself from the proceedings, because prior to becoming a commissioner, he had worked for Comptel, an organization that opposes the AT&T-BellSouth merger.

Several consumer groups have criticized AT&T’s proposal as not going far enough to protect competition and provide benefits to consumers. Many of the concessions AT&T proposed were simply extensions of earlier conditions put on the company from its merger with SBC. Additional concessions included a new $10 a month broadband service tier, free modems and a promise of a temporary freeze on its rates for other service providers that use its network.