redOrbit, May 13, 2008
By Martha Buyer

It's been two years since merger mania hit the domestic telecommunications world, with the necessary approvals granted for Verizon's acquisition/absorption of MCI.

December 2008 will be the second anniversary of the AT&T/Bell South merger.

Although you might be asking, "Who but a wonky telecom geek would care about this?" in fact, every large customer of every large carrier (including competitive local exchange carriers or CLECs like Paetec and One Communications, among others) should care.

Certain conditions of those mergers are set to expire in July 2008, and there can, and will, be serious consequences to the bottom line of many enterprise customers.

The area of concern is "special access," whose pricing was capped as a condition of the Verizon-MCI merger. These caps expire in July, which is why this issue is very time sensitive. To be clear, "special access" is defined as pretty much everything that doesn't qualify as traditional switched-voice services.

In Level I techie-talk, this means broadband, including T1, DS3, OCN, frame relay, and MPLS. These service offerings are the building blocks for enterprise customer networks. In addition, these services are the same building blocks used by competitive carriers to supplement their own physical networks.

Armed with the knowledge that the special access handcuffs are about to come off one of the behemoths in the telecommunications marketplace, large-end users can take some steps to protect themselves.

Realize that the time is now. If you're close to the end of an agreement with Verizon, or with a provider that relies on the Verizon network, try to close the deal in the next 60 days.

Read the small print and the ancillary documents carefully (I know it's like watching paint dry, but if you've survived law school, you've read worse) and do what you can to lock in the merger- tied special access rates.

Rate stability here isn't absolute, but it can be used to minimize the effect of sudden, and potentially dramatic, rate increases.

Additionally, another term of the merger was that carriers could not charge different rates to affiliates and competitors. Once the cuffs are off, those rates can be different, thus creating another source of rate instability. An enterprise customer using the services of a CLEC would be wise to both check its existing agreement and check with its account team to determine, before it's too late, how rates will--or may--be affected.

There is a quirky element of particular interest because of one of the unique and creative conditions imposed on AT&T when it acquired Bell South for a mere $85.8 billion. (As a point of reference, Cingular was a joint venture between Bell South and AT&T, so this merger involved both wireline and wireless entities.)

Securing approval for this merger was exceedingly difficult, and in fact, the deal received FCC approval at the absolute 11th hour, after some inspired solutions were offered and accepted.

My personal favorites were the conditions that required AT&T to repatriate 3,000 jobs from overseas, and that require AT&T to create no fewer than 200 jobs in New Orleans (In its 2007 annual report, AT&T says it has 300,000 employees).

Given that the merger approval was sought shortly after Hurricanes Katrina and Rita, this was a great public relations move by AT&T.

My concern was that it's one thing to make promises to organizations like the Communications Workers of America (CWA) when the chips are down, and something entirely different to actually deliver on those promises.

However, my skepticism was misplaced. AT&T has issued a press release indicating that it is looking for employees to staff a new call center just outside New Orleans in Metairie, La. After following the directions in the press release (I'm not sure how many job applicants review corporate press releases, but that's another matter entirely), I found that of seven jobs open in Louisiana, only one was at the aforementioned call center.

This is perhaps good news. Maybe the staffing is already largely complete.

Nonetheless, AT&T is living up to its commitments. The best news is that no one appears to be holding a gun to its head.

Martha Buyer is an attorney concentrating in the practice of telecommunications law. Her clients range from Fortune 500 companies to small family-owned businesses where she has provided a range of telecommunications consulting and legal services, primarily geared to support corporate end-users working with carriers and equipment providers.

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