**CONCURRING STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

***Re: AT&T Inc. and BellSouth Corporation Application for Transfer of
Control, WC Docket No. 06-74***

As a Commissioner, I am required to review the transactions that come
before me -- not necessarily the ones that I would have preferred. This
transaction has given me serious pause, but through hard work and
genuine compromise, we were able to achieve a result that delivers
major, tangible benefits to consumers. A historic merger warrants
historic conditions. I don\'t pretend that we addressed every possible
issue presented here or that it is possible, or even appropriate in this
context, to try to rectify years of decisions that have undercut
competition. Yet, drawing on the full record, I have tried to
counter-balance the effects of this transaction by asking for meaningful
conditions that protect the open and neutral character of the Internet,
benefit consumers by promoting affordable broadband services, and
preserve competitive choices for residential and business consumers.

These are rapidly changing times in the telecommunications industry and
the broader communications marketplace in general. Mergers that were
unthinkable only a few years ago now seem like a regular occurrence. But
for a few brave voices in the competitive community, a handful of
tireless consumer rights advocates, and a few concerned leaders on
Capitol Hill, most observers, both inside and outside Washington, DC,
don't focus on this trend of consolidation. It seems as if the
widespread view, from our supposed antitrust watchdogs at the Department
of Justice to many inside this building, is to simply accept this
process as inevitable.

It is against this backdrop the Commission today conditionally approves
the formation of the country's largest wireline, wireless, and broadband
company. This combination will directly touch residential consumers,
wireless customers, small and large businesses, local governments and
institutions across the United States. A merger of this breadth and
scope raises serious questions for policymakers and consumers because
communications services -- voice, data, and video -- are so integral to
our daily lives and to the economic success of our communities and
national economy. I share many of the concerns raised about this
combination and have tried to put in place a meaningful set of
conditions to address them.

The result we reach today is not perfect. Rather, it reflects true
compromise. Yet, on balance, it will benefit the public interest in
several significant ways. In the item, we take important steps to
address concentration in the broadband market by accepting as a
condition AT&T's commitment to maintain a neutral network and neutral
routing in its provision of wireline broadband Internet access service.
This commitment will help preserve the open nature of the Internet from
the consumer to the Internet cloud. As a result of our conditions,
consumers also will have access to more affordable broadband services,
whether purchased as a bundled package or as a stand-alone offering that
can be paired with wireless or Internet phone service. In addition, we
take significant steps to promote and preserve competition by requiring
that the applicants divest wireless broadband spectrum that will be
critical to the development of an independent broadband option; by
ensuring that competitive carriers will continue to have access to
critical wholesale inputs that they need; and by providing that these
conditions last for a meaningful period of time.

At the same time, the applicants will be able to move forward with their
plans to accelerate their broadband and video deployment across their
entire footprint. To that end, I would have preferred a clearer and more
enforceable set of commitments on the applicants' plans to bring true
high-bandwidth broadband services to all consumers, including low income
consumers and those in rural areas. But I am pleased that the combined
company has agreed to reach 100% of their customers with at least basic
broadband service by the end of 2007 and to file a report on their
progress in deploying advanced video services.

This proceeding has been challenging. I would like to thank the parties
and my colleagues for their willingness to consider and adopt critical
consumer protections to mitigate some of the potential harms of this
transaction. Without these conditions, I could not support this
combination, so our ability to find common ground was critical to this
decision. I would have preferred more rigorous safeguards in some areas
and longer durations for certain conditions that we adopt. At the same
time, I know and respect that some of my colleagues come at this
proceeding from a very different starting position.

That fact was keenly driven home two months ago when the Department of
Justice waived this merger through without the imposition of even a
single condition to protect competition or consumers. I disagreed with
that approach and continue to believe that a merger of this magnitude
warrants a careful review of the public interest, something I have
pressed hard for in this case. We are obligated to analyze carefully the
record evidence and determine whether the public will be served better
by the transaction being approved or being denied, and whether
conditions may be necessary to mitigate harms to consumers. The manner
in which the Commission reaches its decisions is also important, so I
appreciated the willingness of my colleagues to provide additional
opportunity for public input on the impact of this deal and on the need
for adequate conditions.

We won far more concessions to benefit the public than anyone predicted
when this deal was announced. People expected us to deliver a few
kilobits, and we came through with several megabits. What follows is my
analysis of many of the critical elements that made this agreement
possible.

**[Ensuring a Neutral and Open Internet]{.underline}**

One hallmark of this Order is that it applies explicit, enforceable
provisions to preserve and protect the open and interconnected nature of
the Internet, including not only a commitment to abide by the four
principles of the FCC Internet Policy Statement but also an historic
agreement to ensure that the combined company will maintain a neutral
network and neutral routing in its wireline broadband Internet access
service. Together, these provisions are critical to preserving the value
of the Internet as a tool for economic opportunity, innovation, and so
many forms of civic, democratic, and social participation.

The Internet has been a source of remarkable innovation and has opened a
new world of social and economic opportunities, precisely because of its
openness and diversity. To help preserve this character, the FCC last
fall adopted an Internet Policy Statement that sets out a basic set of
consumer expectations for broadband providers and the Internet. With
these four principles, the Commission sought to ensure that consumers
are entitled to access the lawful Internet content of their choice, to
run applications and use services of their choice, subject to the needs
of law enforcement, and to connect their choice of legal devices that do
not harm the network. This Order rightly requires the applicants to meet
these basic provisions adopted unanimously by the Commission and applied
as enforceable conditions to the BOC-IXC mergers, last year.

Most significantly, the Commission takes a long-awaited and momentous
step in this Order by requiring the applicants to maintain neutral
network and neutral routing in the provision of their wireline broadband
Internet access service. This provision was critical for my support of
this merger and will serve as a "5^th^ principle," ensuring that the
combined company does not privilege, degrade, or prioritize the traffic
of Internet content, applications or service providers, including their
own affiliates. Given the increase in concentration presented by this
transaction -- particularly set against the backdrop of a market in
which telephone and cable operators control nearly 98 percent of the
market, with many consumers lacking any meaningful choice of providers
-- it was critical that the Commission add a principle to address
incentives for anti-competitive discrimination. Defining the exact
parameters of any neutrality provision is, almost by definition, complex
and difficult. The precise contours, scope, and exclusions in this
provision reflect compromise and a predictive judgment about how, in the
words of Prof. Tim Wu, "to preserve the most attractive features of the
Internet as it now exists." The work is not done, however. It is
critical that we remain vigilant and continue to explore comprehensive
approaches to this issue; but I expect this significant step will inform
the debate in the coming months and years. I appreciate the efforts of
the many diverse groups and individuals who have contributed to this
effort and, in particular, I want to thank Commissioner Copps for his
leadership on this issue and for his commitment to the effort to devise
a carefully-crafted condition.

**[Encouraging Consumer Access to Broadband]{.underline}**

*Affordable Broadband.* We made substantial progress during our review
in increasing consumer access to broadband services. These services are
increasingly recognized as critical for the growth of small businesses,
for persons with disabilities, and as a driver of opportunity in so many
aspects our lives, including distance learning and telemedicine. So, the
commitment to offer basic broadband service for \$10 per month should
help lower the cost for many consumers who are just starting to take
advantage of the broadband experience. I've said often that we need more
bandwidth value in this country, so I am pleased to see this commitment
from the applicants. We have heard from many Members of Congress, state
and local officials, and community organizations who believe that the
ability of the combined company to deliver low priced broadband services
was particularly appealing to them.

*Broadband Build-Out.* I also note that, in response to our call for
conditions, AT&T has committed to provide broadband services to 100% of
their territory by the end of 2007. A ubiquitous broadband commitment is
key because people all over this country want access to the
opportunities that flow from this technology, no matter where they live.
While I support adopting this commitment as a condition of the merger,
it alone will not be a panacea. It would have been substantially
improved by the inclusion of more specific, quantifiable, and
enforceable commitments for rural and low income consumers, who deserve
to enjoy the benefits of this transaction, too.

This commitment also relies on a definition of broadband that does not
nearly put our country on par with our global competitors and is not at
a sufficient level of bandwidth to support the provision of video
services. I would have supported adoption of a condition requiring the
applicants to meet agreed-upon levels of fiber deployment, which is
critical for the deployment of competitive video services, one of the
chief benefits touted for this combination. I do appreciate the
applicants' willingness to respond to my concerns by outlining some of
their fiber and video deployment plans and agreeing to provide a report
one year from now on their progress, but I wish that we could have done
more to ensure that consumers truly reap the purported benefits of
providing real video competition in the BellSouth region. I am hopeful
this will occur even in the absence of enforceable conditions.

I am particularly pleased that AT&T also has committed to increase its
build-out of wireless broadband services. As a condition of this merger,
AT&T will jumpstart service in the under-used 2.3 GHz band by agreeing
to a specific construction commitment over the next three and a half
years. AT&T already has conducted a number of successful trials on the
spectrum and is running a commercial WiMAX network in Pahrump, Nevada. I
want to see more deployment in the 2.3 GHz band. In addition to
divesting its 2.5 GHz wireless broadband holdings, AT&T has met my
challenge by committing today to a specific level of buildout by July
2010. Much like the Sprint-Nextel merger, I am hopeful that this
build-out commitment will prove a catalyst to the entire Wireless
Communications Service. Like a rising tide that lifts all boats, AT&T's
work in this band will be a boon for other wireless broadband providers
looking to provide service in the 2.3 GHz band.

*Stand-Alone DSL.* Another major victory for consumers is the ability to
purchase broadband services without having to buy a whole bundle of
traditional telephone service. So, I fully support the applicants'
commitment to provide a meaningful stand-alone DSL option for consumers
who want access to broadband services but who want to "cut the cord."
Consumer advocates have strongly supported this condition, which should
expand the options available for residential and small business
consumers who are interested in relying on wireless or Internet phone
service for their voice connections.

We have shown greater attention in this Order to the stand-alone DSL
condition because it must be implemented fairly in order to be a
meaningful option for consumers. In the previous merger of then SBC with
AT&T, we conditioned our support on the offer of a similar naked DSL
service. I was disappointed when that offer was made to consumers at a
price point that seemed designed to make it unattractive for consumers,
virtually at the same level as the entire bundled offering. In
California, for example, consumers who were actually able to learn of
the availability of stand-alone DSL, which had not been advertised, were
quoted a rate of \$44.99 per month, a mere one dollar less than the
least expensive regular bundle of DSL and phone service. So, it is
especially meaningful here that we were able to reach agreement for AT&T
to offer the service at \$19.95. Particularly in combination with the
Internet neutrality conditions adopted today, this stand-alone DSL
offering should create an opportunity for the development of competitive
Voice over Internet Protocol (VoIP) services. This condition has the
potential both to give consumers more options and flexibility in their
broadband and voice services, and to spur the development of competition
and choice.

**[Promoting Competitive Alternatives]{.underline}**

Some have argued that this combination is a mere afterthought in the
world of converged communications. But this analysis falls short. Even
the Order as drafted recognizes that the markets for business and
residential services are highly concentrated in the applicants'
in-region territories. Moreover, AT&T is already a substantial
competitive force and has the potential to be a greater competitive
force in the BellSouth region. In fact, just last year AT&T justified
the SBC-AT&T merger on grounds that it would compete nationwide, not
merge nationwide. So, in the absence of meaningful conditions from the
Department of Justice, it is critical that we adopt the safeguards we do
today to protect against the loss of competition.

*UNEs.* To address concerns about the loss of competitive alternatives,
the applicants have agreed to freeze the wholesale rates for critical
unbundled network elements and to recalculate the impairment triggers
for determining the availability of the elements. As a result,
competitors will have access to critical elements in some additional
markets where AT&T is lost as a competitor, and they will not be faced
with draconian price increases. The applicants have also offered an
important new commitment -- a commitment not to seek forbearance from
section 251 unbundled network elements -- that should provide
competitors another critical measure of stability.

*Reducing Costs of Interconnection Agreements.* I was also pleased that
we require the applicants to take a number of steps -- including
providing interconnection agreement portability and allowing parties to
extend their existing agreements -- to reduce the costs of negotiating
interconnection agreements. This condition also responds to concerns
about incentives for discrimination -- whether through the terms of
access offered to competitors or through raising competitors' costs --
long-recognized by Commission precedent. This condition also addresses
the purported purpose of this merger, which is to respond to intermodal
competition.

*Special Access Services.* It is clear that many business customers and
wholesale carriers rely heavily on the applicants' special access
services for their voice and high-speed connections. Independent
wireless companies, satellite providers, and long distance providers
also depend on access to the applicants' nearly ubiquitous network and
services to connect their networks to other carriers. In addition, many
small rural providers depend on these services to connect to the
Internet backbone. So, if the applicants were to raise prices as a
result of diminished competition, such action would directly impact the
cost and availability of services for large and small businesses,
schools, hospitals, government offices, and independent wireless
providers. Particularly in light of DOJ's inaction, I believe it is
imperative to adopt measures to protect against the loss of competition.
The Order includes modest provisions to reduce the applicants' prices
for special access services in areas where the Government Accountability
Office (GAO), in its recent report on special access services, raised
the most significant concern, and the Order includes a price freeze for
the remainder of the applicant's special access services across the
entire 22 state territory of the new company.

The Order also addresses some of the terms and conditions that have been
called into question by GAO. For example, it eliminates on a going
forward basis at least one condition that restricts the ability of
wholesale providers to buy from other channels. While I would have
supported, and many commenters have strongly urged the Commission to
adopt, more stringent safeguards in this area, we have attempted to
provide a modest level of stability for 48 months for these many
consumers of special access services. I do note that the Commission has
a long-pending proceeding on special access services and, with fresh
motivation from GAO's report, it will be even more critical that the
Commission tackle these issues as comprehensively and expeditiously as
possible. I will continue to push for action on this long-overdue
proceeding.

*Wireless Broadband.* I am particularly pleased with the conditions
related to wireless broadband because these services offer one of the
most significant opportunities for much-needed broadband competition.
And while many simply talk about broadband deployment, I have been
passionate about taking specific steps to drive actual wireless
broadband build-out. I want to promote flexibility and innovation in
this wireless space, but since the spectrum is a finite public resource,
I want to see results as well -- particularly in the area of wireless
broadband.

Consistent with my efforts to promote wireless broadband deployment in
other mergers and proceedings, I worked closely with the applicants to
come up with conditions for the merged company's holdings that will
serve the public interest. Most significantly, AT&T will divest the
licenses and leases it acquires in the 2.5 GHz band from BellSouth
within one year of the merger's closing date. This significant
commitment will ensure that independent broadband access providers
interested in developing services in the 2.5 GHz band will now have
access to spectrum in an important part of the country that may
otherwise have been unavailable to them. Increased 2.5 GHz availability
in the southeast will lead to the deployment of wireless broadband
services in this market in direct competition to the new AT&T -- a real
boon for consumers. And consumers in other markets will benefit as
increased deployment in the southeast will continue to improve
efficiencies for the entire 2.5 GHz industry as broadband services are
rolled out in the band across the country over the next several years.

Taken together, the two spectrum conditions -- a build-out condition for
the 2.3 GHz band and divestiture of the 2.5 GHz band -- will
significantly advance the deployment of wireless broadband services in
the southeast and throughout the rest of the country. With the belief
that actions speak louder than words, I truly am pleased to have been an
advocate for that outcome.

*Tunney Act Review.* It is worth noting that, even as we move forward
with this proposed merger, a federal court is still reviewing the
historic Bell-IXC mergers approved by DOJ and the Commission last year,
and the adequacy of the conditions imposed on those mergers. With that
review pending, leading members of Congress on a bi-partisan basis have
raised questions about whether it is appropriate to move forward with
review of this transaction. Both this Order and the Commission's orders
in last year's mergers take note of DOJ's review and conclusions, so I
am pleased that the applicants have committed to apply the result of any
changes in the consent decree regarding the divested buildings in the
SBC-AT&T merger in the BellSouth territory, as well. I have serious
reservations about whether the divestiture analysis applied by DOJ
adequately reflects the competitive harms, so I was also pleased that
AT&T has agreed to consult with the FCC on the need for further
conditions, should the Tunney Act review process lead to the imposition
of greater conditions for last year's mergers.

**[Ensuring Access for All Americans]{.underline}**

*Persons with Disabilities*. It is significant that we have heard in
this proceeding from many groups representing persons with disabilities.
Many of these commenters have noted that the applicants have a good
history of working with consumers with disabilities and have encouraged
the Commission to look carefully at the how the merged company will
provide accessible services in the future. To that end, I want to
commend the applicants for agreeing to provide a report describing the
efforts of the combined company to provide high quality service to
consumers with disabilities on a going-forward basis.

*Rural Carrier Concerns.* I also note that a number of commenters have
raised concern about the impact of this transaction on small, rural
carriers and their ability to deliver high quality, advanced services to
customers in Rural America. This Order does adopt a number of measures
-- including the freeze on special access rates, a freeze on certain
transiting rates, and a condition to address Internet backbone peering
issues -- that should help ameliorate these concerns. Still, it will
require an on-going effort to ensure that Rural Americans benefit from
the evolution of technology and this changing marketplace.

\* \* \* \* \*

I support the conditions that we adopt in this Order and find that they
strike a reasonable balance. Particularly given where we started, and
the paltry baseline afforded by DOJ's review, I believe that we have
advanced the public interest significantly. Were the pen solely in my
hand, I likely would have crafted different conditions, but each of my
colleagues would likely say the same thing.

I rely specifically on the companies' assurances that they will
faithfully and fairly implement the commitments they have made both in
their applications and in their more recent filings. I fully expect they
will live up to the letter and spirit of this agreement. It will also be
important that this Commission commit to monitor and vigorously enforce
the terms of this Order.

While I support this transaction as conditioned, it is important to note
that there is much analysis in this Order that I find lacking or
downright troubling. It is important to consider this combination in
light of larger industry trends and developing intermodal competition,
but I still find that the Order's sweeping conclusions about the lack of
impact requires us to take too much on faith. It also rejects
long-standing Commission precedent on the harms of horizontal
consolidation in the industry, in what some might describe as an effort
to walk away from "phone-to-phone" competition solely in favor of
intermodal competition. While I can agree to support the package of
conditions agreed to by the applicants and my colleagues, I choose to
concur to the Order given my concern with the overall analysis.

I would also like to thank the many Members of Congress, outside
parties, and consumers for their comments, and AT&T and BellSouth for
their efforts to address concerns that have been raised in this
proceeding. I'd especially like to thank my colleague and friend
Commissioner Copps for his tenacity and dedication to the public
interest. He and his staff have worked tireless to make this agreement
possible. It has taken effort on all sides, but we have worked quickly
to achieve a result that strikes a balance. At times, this has been a
difficult and unnecessarily protracted process but I am pleased that we
moved quickly to conclude this proceeding once the Commission moved past
its own internal drama. It turns out there wasn't an impasse, after all.

Finally, the fact that I was able to reach a successful conclusion in
the waning days of the year is a tribute to the monumental efforts of my
staff, especially Scott Bergmann and Barry Ohlson. They sacrificed their
holidays, holding marathon sessions and working countless long hours. My
heartfelt thanks are due to their families, as well, for the
considerable sacrifices they made in allowing them to carry on. These
are two of the finest public servants I have known, and two of the
finest telecom lawyers in this city. They rose to this occasion as they
have so often in the past. Appreciation is due not only from me, but
from so many Americans who will benefit from their work, even if they
never know any of our names.

As I have oft stated, the opportunities arising from today's
technologies are greater than ever, but so is the penalty for those left
without options. With that in mind, I have made every effort to ensure
that consumers reap the benefits of this rapidly changing marketplace
and this transaction.

For all these reasons, I concur in this Order.