The Federal Communications Commission (FCC) has approved AT&T's $85 billion purchase of BellSouth, creating a new telecom industry giant like none other since the dominance of the old AT&T was dismantled in 1984.

The acquisition reunites large parts of AT&T's former domain, merges BellSouth's nine-state territory in the South into AT&T's existing operations spanning the Midwest, Southwest and West Coast and provides AT&T complete control over Cingular Wireless, the country's largest mobile-telephone provider. at a time when wireless is the newest frontier for reaching the Internet.

Cingular is jointly owned by AT&T and BellSouth.

Critics of the deal argue that AT&T's size also could give it more power to set prices for telephone and other services. AT&T has said that at the moment it would not impose any new charges on web companies that use its lines.

The Federal Communication Commission had long been deadlocked over AT&T's purchase of BellSouth as Republican and Democratic commissioners sparred over what conditions to impose on the deal.

The company had offered significant concessions to protect consumers and ensure competition.

AT&T's commitments include a two-year commitment to abide by "net neutrality" - agreeing not to discriminate against web companies either in pricing or in access to lines - an about-face for the company, which had vigorously argued that it should be allowed to give priority to Internet firms such as Google, Yahoo! and Microsoft if they pay for it.

With a market capitalization of $225 billion, the new AT&T will vastly outgun its leading competitor, Verizon, which was born six years ago in a $52 billion merger between GTE and Bell Atlantic.

But while the merger creates a new AT&T behemoth, the combined company is far different from the one that reigned for 70 years as a government-regulated monopoly and the world's most advanced, comprehensive and affordable telephone system.

Even as the new AT&T faces limited competition from other telephone operators, it is challenged by cable and computer companies playing in a far larger, more complicated marketplace encompassing television, broadband and wireless as well as local and long-distance land-line telephone service.

In recent years, cable companies have been successful at poaching the phone business, bundling it with TV and broadband and selling it to subscribers, than traditional telephone operators.