Telecom merger to be wireless powerhouse

The FCC conditionally approves the merger, marking the final regulatory hurdle for what will become the nation's largest local phone and wireless company.

3 min read
The Federal Communications Commission today conditionally approved the merger of Bell Atlantic and GTE, marking the final regulatory hurdle for what will become the nation's largest local phone and wireless company. see story: Verizon who?

The approval clears the way for the companies to complete their merger, first announced nearly two years ago, as early as June 30, according to GTE representatives.

The merger represents the ongoing trend toward consolidation in the communications industry, in which several Baby Bell local phone firms have combined, AT&T has acquired two cable operators, and blockbuster deals such as Sprint-MCI WorldCom and America Online-Time Warner have created new global competitors. The combined Bell Atlantic-GTE company, to be called Verizon Communications, will become a communications powerhouse, offering a variety of voice, Internet and wireless services to consumers nationwide.

But first, Bell Atlantic and GTE must spin off certain long-distance and Internet assets and submit to a total of 25 conditions intended by the FCC to improve competition.

Most notably, GTE and Bell Atlantic must spin off GTE's Internet business in a separate public company. An initial public stock offering for Genuity, formerly known as GTE Internetworking, is expected within two weeks, according to a GTE spokeswoman.

Wireless leaders
Six major U.S. carriers with nationwide networks have emerged, largely the result of recent mergers and partnerships within the industry.
Carrier Subscribers
Verizon Wireless 23 million*
AT&T Wireless 12 million
SBC Communications 11.2 million
Sprint PCS 5.9 million**
Nextel Communications 4.9 million
VoiceStream Wireless 1.8 million***
*after Bell Atlantic-GTE merger closes
**includes Sprint PCS affiliates (5.7 million without)
***does not include subscribers from Ariel Communications acquisition

Source: Companies

The spinoff is necessary because the Baby Bell companies such as Bell Atlantic are forbidden from offering long-distance voice or data services, including Internet access, until they have opened their regions to competition. Bell Atlantic is allowed to offer long-distance services in New York, though not in the 12 other states or District of Columbia where it offers service.

Until the combined Verizon opens those markets to competition, the company will not be allowed to own more than 10 percent of the Genuity Internet backbone business.

"By requiring that the Internet backbone asset be spun off and through the other merger conditions, we have preserved the fundamental incentive structure of the (1996 Telecommunications Act), sought to stimulate competition, and to promote more and better service offerings for consumers," FCC Chairman William Kennard said in a statement.

Bell Atlantic and GTE had agreed to many of the concessions via earlier proposals submitted to the FCC, so the approval had been expected for some time.

The companies also will be required to create a separate affiliate for advanced services in the combined Bell Atlantic-GTE region, in addition to a variety of other requirements including a prohibition against charging consumers monthly minimum flat fees for long-distance service.

In order to spur out-of-region competition, Verizon also will be required to spend at least $500 million to provide competitive local phone service, or to get at least 250,000 out-of-region local phone lines, within three years or face a $750 million fine.

"This final approval contains reasonable conditions that clear the way to unite these two great companies into Verizon Communications, which will be a world-class competitor able to bring innovative telecommunications services to customers across the country," Charles Lee, chief executive of GTE and co-CEO of the new company said in a statement.