Case Closed: Judge Says Megamergers Serve Public Interest

After nearly a year of deliberations, a federal judge has decided that the 2005 Bell megamergers were in the public interest.

Judge Emmet G. Sullivan released a 56-page order on Thursday that reaffirmed the Justice Departments 2005 consent decree conditionally clearing the SBC-AT&T and Verizon-MCI mergers. Sullivan said his task was limited under the law and that the deals did not harm the public.

While we don’t think the market had built in much risk from the proceeding, the decision is clearly a relief for the Bells, wrote analysts for investment firm Stifel Nicolaus in a memo to clients. They noted an appeal of Sullivans order would appear to be very uphill.

Competitive carrier association COMPTEL said it was disappointed that Sullivan did not think federal law allowed him to do more to challenge the Justice Departments approval of the mergers.

But, said Jonathan Lee, general counsel for COMPTEL, the judge made clear in his opinion that he was very troubled by the limited efforts put forth by the government in allowing the Bell companies to swallow two of our nations largest competitors. By undertaking a thorough review of the merger consent decrees, Judge Sullivan sent a clear message that the Justice Department will be held accountable for its actions.

Citing the 1974 Tunney Act, COMPTEL last May asked for permission to intervene in the Justice Departments requirement that SBC and Verizon divest some of their unused fiber networks before granting the carriers takeovers of AT&T and MCI, respectively.

The Justice Department had said the divestitures would satisfy antitrust statutes, but COMPTEL said they were insufficient. The association asked for a review under the Tunney Act, which requires federal courts to approve the Justice Departments antitrust consent decrees. Anyone may file comments for or against the action in question. The act contains specific criteria the courts must consider in determining whether the Justice Departments decrees serve the public interest.

Sullivan agreed to hear the case, but only allowed COMPTEL to act as a friend of the court. That means the association served as a consultant to the judge, answering questions and providing information. Other groups, including ACTel, the New York attorney general, the National Association of State Utility Consumer Advocates (NASUCA) and Sprint Nextel Corp., also served as friends of the court.

AT&T spokesman Michael Balmoris said the carrier was always confident that after the courts review of the record it would conclude that the consent decree is in the public interest.

A Verizon spokesman said the company had no comment.

AT&T Inc. www.att.com  

COMPTEL www.comptel.org  

Stifel Nicolaus www.stifel.com  

Verizon Communications Inc. www.verizon.com