FCC’s McDowell Stands By Recusal on Merger Vote

UPDATED: Federal Communications Commission (FCC) member Robert McDowell is standing by his recusal from the agency’s AT&T-BellSouth merger vote, declining an invitation to break the 2-2 deadlock over the $80 billion deal hung up on network neutrality conditions.

McDowell, nominated to the FCC by President Bush on Feb. 6, is the former lobbyist for a trade group of AT&T and BellSouth competitors opposing the merger. Since taking his seat on the five-person panel on June 1, he has recused himself from negotiations over the deal to avoid the appearance of a conflict of interest.

On Monday, he stood by his recusal, responding to a memo by FCC General Counsel Sam Feder that said the government’s “significant interest” in the merger outweighs the appearance of a conflict of interest and cleared McDowell to vote.

McDowell said in a statement that Feder’s memo left him with no confidence or comfort. “I had expected a memorandum making a strong and clear case for my participation. Instead, the [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.

“I expected the legal equivalent of body armor, I was handed Swiss cheese,” he added. “Accordingly, I disqualify myself from this matter. This state of affairs is personally disappointing to me. It appears that the lingering question of my involvement is being used as yet another excuse for delay and inaction.”

Without the Republican McDowell’s participation, FCC Chairman Kevin Martin lacks a majority on the panel. Martin and fellow Republican Deborah Taylor Tate originally favored a no-conditions approval of the deal. But the Democrats on the FCC — Michael Copps and Jonathan Adelstein — have used the Republicans’ lack of majority to push for more conditions to the deal.

One of the key conditions is for AT&T to agree not to charge Internet commercial content providers, such as Google and Yahoo, premium fees based on bandwidth consumption. And although AT&T said it would adhere to the FCC’s network neutrality principles for 30 months, it has refused to accept, along with BellSouth, the Democrats’ demand for additional network neutrality conditions.

However, the concessions the companies agreed upon include offering broadband to 100 percent of the living units in the AT&T-BellSouth market by January 2008 and giving customers the option of standalone DSL for 30 months.

AT&T also promised to offer free modems throughout next year to residential customers who upgrade from dial-up service. For new Internet customers, AT&T proposes to offer broadband service at $10 a month for an unspecified time period.

With McDowell on the sidelines, Martin said, “I will continue to try to work with my colleagues to bring our consideration of this merger to conclusion.”

“My goal in recent weeks has been to ensure that the Commission acted on the transaction,” Martin said. “The Commission is not obligated to reach a particular outcome. However, the Commission is responsible for making a determination in a timely fashion.”

Martin said in a statement, “I appreciate Commissioner McDowell’s thoughtful consideration and respect his decision to abstain.

Copps said McDowell’s recusal provides “clarity on who will be participating in this proceeding. That should give some juice to our ongoing discussions.”

The merger would give AT&T 70 million landline customers across 22 states, giving it full control of the nation’s largest cellular company. AT&T co-owns Cingular Wireless with BellSouth; combining the two companies’ DSL broadband customers would give AT&T 9.1 million high-speed Internet customers, barely behind market leader Comcast’s 9.3 subscribers.

The Department of Justice approved the merger with no strings attached on Oct. 11. FCC approval is the final government hurdle to the merger.

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