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Telecom Mergers Threaten
Competition
(09/15/98; 6:20 p.m. ET)
By Mary Mosquera, TechWeb
WASHINGTON, D.C. -- Federal regulators should
hold off on approving telecommunications company
mergers, and Congress should take another look at the
1996 law that deregulated the industry, a public-interest
group official told senators Tuesday.
In hearings, the Senate Judiciary Committee's antitrust
subcommittee examined consolidation in the telecom
industry, specifically the $55 billion Bell Atlantic-GTE
merger announced in July. Lawmakers are concerned
about the shrinking number of local phone companies
resulting from merger activity and the effect on
competition.
Federal regulators review mergers and also enforce the
1996 Telecommunications Act, which was passed to
open up competition among local phone carriers and
reduce customer prices. However, since passage of the
law, mergers among local phone carriers have heated
up more than the promised competition.
"The Justice Department is deluged with work from
Microsoft and the communications sector. It's time for
Congress to do something," said Gene Kimmelman,
co-director of Consumers Union, which opposes the
Bell Atlantic-GTE merger.
The Bell Atlantic-GTE merger will allow the company
to bundle services, including local, long distance,
wireless, and Internet. Eventually, the number of
carriers capable of offering such bundles worldwide will
eventually shrink to about six, according to Bell Atlantic
CEO Ivan Seidenberg.
"Combining with GTE is a necessary part of what Bell
Atlantic must do to play in this new game," Seidenberg
said.
Rather than compete, the Baby Bells are merging with
each other, said William Esrey, CEO of Sprint, and this
merger activity runs counter to the promises of the
telecom law.
At some point, the market will become so concentrated
that no company will try to compete in a Baby Bell's
territory, Kimmelman said, recommending a temporary
freeze on mergers in the industry to allow time for the
1996 law to be implemented properly. The consumer
advocate also urged passage of a bill, S.2207, the
Antitrust Improvement Act, to give regulators other
mechanisms to enforce the telecom law and open up
competition. Clark McLeod, the CEO of
McLeodUSA, a small competitive local exchange
carrier that has carved out a niche in Iowa delivering
local phone service, testified before the lawmakers
about difficulties the company has encountered doing
business in U S West's business territory. McLeod
resells access purchased from the regional Bell
operating company and is building its own network.
"It's been awful getting resale from the RBOC, and the
Justice Department has not supported us, saying they
do not have enough resources," McLeod said.
The Senate subcommittee will conduct an official inquiry
into the effects of the Telecom Act early next year, and
the General Accounting Office will report its findings on
telecom competition to Congress in February.
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