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FCC agrees to changed AT&T-BellSouth condition

AT&T is required to offer a reduced rate to other phone companies that use its networks to connect calls.

Releasing its approval of AT&T's BellSouth acquisition, the U.S. Federal Communications Commission made a merger condition revision that benefits rivals Verizon Communications and Qwest Communications International.

AT&T is required to offer a reduced rate to other phone companies that use its networks to connect calls. That means former Bell phone companies Verizon and Qwest, which use AT&T networks in some U.S. regions, would also pay the lower rate.

AT&T had previously agreed to cut the rate on the condition that Verizon and Qwest do the same, incurring the wrath of Verizon and Qwest and raising questions among some lawmakers.

Since then, AT&T offered to modify the condition, even though it believes the original is "lawful and fully justified by market conditions."

As part of the order, the FCC said AT&T will only have to offer the reduced rate for 39 months instead of 48 months.

"In order to resolve any lingering controversy over this issue, AT&T is willing to modify that requested by the Commission," the company said in comments to the FCC, which agreed to accept the change.

Stifel Nicolaus analysts noted the order "is modest good news for Verizon and Qwest, as they will no longer be subjected to the reciprocity requirement in order to benefit from the AT&T commitment to cut certain special-access rates.

"AT&T says it will lose a bit more revenue, though it will save some money as the FCC agreed to shorten the duration of the rate cuts by nine months," it said in a note to clients.

Verizon said the FCC "acted wisely."

"The original formulation discriminated against some carriers and was on extremely shaky legal ground," the company stated. "In addition, merger conditions cannot be used as a backdoor way to impose requirements on a non-party to the merger. The courts have been clear on this point."

The FCC approved AT&T's purchase of BellSouth in December.

In 1984, the original AT&T, or "Ma Bell," was split into regional "Baby Bell" companies, including Qwest and BellSouth.