AT&T and BellSouth got a bit of a nasty surprise on their way to a quick merger.

It appeared the way was cleared when the Department of Justice shocked many in the industry by approving the merger without any conditions. As it turned out, two Democratic members of the FCC were shocked enough to put the brakes on what could otherwise have been a fast train to Mergerville for the two communications giants.

Based on concerns raised by Jonathan Adelstein and Michael Copps, the AT&T/BellSouth merger vote has been put off for a month, while issues regarding the state of post-merger competition are considered. AT&T has shown a willingness to negotiate, offering a set of conditions it volunteered to accept, even as it insists such conditions aren't necessary or warranted.

Regardless of what the FCC's final vote will be — and it's not as certain as it once was that the merger will be approved — the time it takes to seriously look at potential damage to the competitive landscape is well spent.

It's unfortunate that the merger approval process seems to have become the major forum for imposing conditions on large incumbents where their competition is concerned, but absent a more comprehensive policy, that seems to be the reality. The regulatory environment is once more leaning in the direction of indecisiveness, or inaction, which was an unfortunate characteristic of Washington's behavior during the telecom bust.

When the FCC last March simply declined to act on a Verizon petition for forbearance from regulatory rules for reselling broadband services, it sent a signal to competitive service providers that they may soon be largely on their own when it comes to dealing with the mega-carriers. The FCC's inaction allowed Verizon to win its request, and the shivers down the collective spine of competitive carriers continue to resonate. But that signal did not come based on a vote but a non-vote, with no comments from anyone.

That's the kind of leadership the telecom industry doesn't need from its federal regulators.

If the FCC truly doesn't believe that an AT&T/BellSouth merger poses any risks to competition, it needs to say so, and say so definitively. If, on the other hand, there are dangers ahead that the FCC is not in position to address, then this also needs to be made clear.

One thing the entire telecom industry has learned is that the worst possible regulatory environment is one of uncertainty. Indecisiveness on the part of regulators leads to a deterioration in investor confidence, which can have a significant impact on the business plans of everyone concerned.

The chilling effect of regulatory doubt may sometimes appear to give the advantage to one group over another, but at the end of the day, it usually hurts everyone.

TELECOM CAPEX SHOWS MODEST GROWTH

Telecom capex spending rose slightly in 2005, posting its third year of growth, according to Infonetics Research's “Service provider capex, revenue and subscribers” report. Capex spending is expected to balloon to more than $236 billion by 2009, and that figure is much lower than it would be if the industry wasn't busy consolidating, said Stephane Teral, principal analyst.

Source: Infonetics Research