AT&T and BellSouth have filed statements with the Federal Communications Commission responding to charges that a new report issued by the Government and Accountability Office (GAO) weakens its case for a merger of the two corporations.

The challenge comes from the Ad Hoc Telecommunications Users Committee, which filed the GAO survey with the FCC's AT&T/BellSouth proceeding docket on December 1st.

"The GAO Study confirms what Ad Hoc and other parties have been reporting to the Commission for the past several years—competitive alternatives to ILEC special access services simply do not exist at the vast majority of commercial locations where enterprise customers require those services," the Ad Hoc statement says. "As a result, the Bell Operating Companies’ ('BOCs') have raised their prices in areas where the FCC has de-regulated pricing."

The Ad Hoc committee represents 23 big corporate buyers of high volume voice and data service. The GAO study, released in November, concluded that the FCC's deregulatory policies have not resulted in more competition for so-called "dedicated access."

"The market conditions revealed by the GAO Study are highly relevant to the instant proceeding," the Ad Hoc filing says. "They demonstrate (again) that the merger would not serve the public interest unless the Commission imposes conditions to protect competition and customers from the BOCs’ market power over special access services"—that is, big volume, high-speed broadband access.

But AT&T/BellSouth's reply to the Ad Hoc filing begs to differ, and gets a little personal too.

The December 7th response accuses Ad Hoc of "glib rhetoric," and contends that its filing "bizarrely and incorrectly asserts that the GAO Study confirms its claims, and supports its request that the Commission condition approval of the AT&T/BellSouth merger on the imposition of radical and far-reaching limits on AT&T/BellSouth’s special access services."

On the contrary, AT&T/BellSouth attorneys say, the GAO study shows that prices have declined in all markets.

"GAO’s only other conclusion was that the Commission needs more and better data to assess competition for special access services —a conclusion with which AT&T agrees," its filing states.

Actually, that was not the GAO's only other conclusion. The audit of the FCC's dergulation policies did state that incumbent telephone company list prices have declined, but attributed this to "price decreases due to regulation and contract discounts."

"However," the report continues, "in areas where FCC granted full pricing flexibility due to the presumed presence of competitive alternatives, list prices and average revenues tend to be higher than or the same as list prices and average revenues in areas still under some FCC price regulation."

The GAO's most prominent finding, summarized in the first sentence of the report, suggests that meaningful competition does not exist in the commercial telecommunications business in the United States.

"In the 16 major metropolitan areas we examined, available data suggest that facilities-based competitive alternatives for dedicated access are not widely available," the study discloses. "Data on the presence of competitors in commercial buildings suggest that competitors are serving, on average, less than 6 percent of the buildings with demand for dedicated access in these areas."

Nonetheless, AT&T/BellSouth attorneys say that this finding has no immediate significance.

Beyond AT&T/BellSouth's representation of the GAO's conclusions, "there is nothing in the report that is at all relevant to this proceeding," the two entities insist:

"The GAO Study does not address the impact of the merger on special access competition, nor does it present data that would shed light on that issue."