As the Federal Communications Commission cuts a swath through the local telephone market to make room for new competition, Bell Atlantic and Nynex joined today in the largest telecommunications merger in history.
The deal between the Baby Bells is valued at more than $52 billion. The resulting new company, to retain the name Bell Atlantic, will be nation's second largest phone company after AT&T. Bell Atlantic will provide telecommunications, entertainment and information services to 26 million customers in 13 Northeastern and Middle Atlantic states, as well as wireless communications to 3.6 million.
The merger is subject to the approval of the shareholders of both companies and federal and state agencies later this year.
SBC Communications and the Pacific Telesis Group became the first two Baby Bells to announce merger intentions three weeks ago in a $16.7 billion deal. Both mergers reflect the local telephone companies' anticipation of new FCC regulations under the recently signed federal Telecommunications Act, which will let long distance carriers, cable television firms, and others compete in the $100 billion local telephone market. Competition will most likely reduce rates consumers pay for local calls, cable, and Internet access.
The law mandated that the local telephone market be opened to competition but left it to the FCC to figure out how. The agency on Friday announced a broad proposal for regulating competition between Baby Bells and new competitors, the first significant effect of the telecommuncations law.
The new FCC rules will go far in determining what rates consumers pay for their local phone calls, Internet access, or cable subscriptions. So far, the agency has left several issues unresolved, instead seeking public comment and suggestions from industry leaders in preparation for issuing the final rules in August.
But the FCC did propose standards for governing disputes between local phone companies and prospective new competitors. The proposal is supported by long-distance providers, but regional phone companies would prefer that the FCC impose minimal guidelines for such negotiations, leaving them to be overseen by state regulators instead.