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To: Paul Reuben who wrote (5301)	10/30/1999 1:04:00 AM
From: Anthony Wong	Respond to of 11568

Data brings in the money for telecom firms news.cnet.com:80/news/0-1004-200-1424684.html?tag=st

To: Paul Reuben who wrote (5301)	10/30/1999 1:08:00 AM
From: Anthony Wong	Read Replies (1) \| Respond to of 11568

MCI/Sprint Merger Makes Bells Look Good October 29, 1999 Teledotocm By Colleen Boothby SO MCI AND SPRINT WANT TO MERGE-- producing a single company with about a 37% share of long-distance telecom revenues. That's still lower than AT&T's 49%. The difference will give regulators a hard time with objections to this union., even though it means concentrating the major competition in the market between a pair of top tier providers and limiting telecom consumers less choice. While there's a long way to go before the merger can be consummated - it requires approvals from the Department of Justice and the Federal Communications Commission, which can take as much as a year or more - it's hard to see how either agency would seriously consider stopping the merger completely. Doing so would trigger a firestorm of opposition from powerful political and economic forces, including a hyper-partisan, anti-regulation Congress that complained vociferously when the FCC reviewed the Ameritech/SBC merger. That particular merger put about a third of the country's local phone lines into the hands of a single company. MCI's and Sprint's combined share of ATM revenues, about 62%, might raise a few eyebrows, and most observers predict Sprint's Internet backbone will be spun off, but these issues seem like background noise. Barring some dramatic and unforeseen change in the competitive structure of the long distance market, it doesn't look like there will be any serious obstacles to the merger. Which means we could soon be looking at a telecom market with only two "first tier" providers of services like ATM, frame, and basic long distance. That's a big problem if you spend a lot of money on telecom services. The three-carrier market is bad enough when it comes to AT&T, MCI, and Sprint marching in lock step on terms, conditions, and pricing. (If you don't think they do, consider one little example. How is it that all three carriers robotically mark up and pass through to their customers the Universal Service and other charges they pay to local phone companies, even though no law or regulation requires them to, while none of them passes through with the same relish the offsetting reductions in the per minute charges they pay?) But a de facto duopoly will be even worse. By the way, can we just dispense with the usual disingenuous claims of expert hired guns that a duopoly is plenty competitive? If a duopoly were competitive enough to drive prices down to economic costs, cellular prices wouldn't have dropped like a rock when PCS finally came on line to compete with the two-to-a-market cellular licensees. The truth is that telecom customers get good prices and good service only when a carrier faces a credible threat that the customer will vote with its feet if the carrier doesn't come through on price and service. A credible threat requires real, competitive alternatives, as any customer putting up with slow-moving, non-responsive local exchange company monopolists will tell you. So what's a customer to do in the face of an AT&T/Worldcom duopoly? There are basically two choices -give more business to some of the second tier companies in the long distance market (e.g., Qwest or Cable & Wireless) or wait for (and perhaps actively support) entry by the Bell Operating Companies ("BOCs"). Neither alternative has been particularly attractive in the past but maybe it's time to re-think. Many large users continue to have legitimate concerns about the level of service they can get from a second tier provider. Historically, these providers haven't always had the capacity, reliability, and account support large buyers need. Nor have they always been able to offer the complete suite of services that more sophisticated, high-volume users want, like ancillary data services or vertical features for toll-free service. Over time, second tier companies will no doubt overcome many of these deficiencies as they gain experience and grow their enterprise - however, it takes time to develop good customer care systems and solid account support. In the meantime, customers with sensitive, high-volume telecom needs are understandably reluctant to be the guinea pig for a new service provider. (On the other hand, as one wag observed, a big difference between frame relay service from MCI or AT&T and frame relay from Qwest is that Qwest hasn't had the same spectacular outages.) The other alternative to the MCI-Sprint/AT&T duopoly is the BOCs. They're experienced, they're equipped, they're eager to compete. But the 1996 Telecommunications Act keeps them out of the long distance market until they can show that their local markets satisfy a 14-item competitive checklist. And local markets generally aren't competitive yet. Specialized niche players (e.g., xDSL service providers) are making inroads but the BOCs still make life plenty difficult for full-service competitors, by obstructing and delaying the interconnection arrangements competitors need to survive. Historically, users who don't like the treatment and service they get from their local monopolist have had no reason to support BOC applications for long distance approval before local markets get more competitive. Once a BOC gets long distance approval, it will have little or no incentive to open its local market and customers are best off in the long run if there's competition in both local and long distance markets. But faced with a long distance duopoly, customers might need to re-think their position. What's better? Closed local markets and a long distance duopoly? Or closed local markets and a long distance market that is more competitive thanks to BOC entry? Users have an opportunity to answer those questions right now. Bell Atlantic has filed with the FCC for approval to provide long distance service in New York, maintaining that it has satisfied the competitive checklist in that state. The 1996 Act imposes strict (and outrageously short) deadlines on the FCC to act on the petition. But the process nevertheless gives interested parties an opportunity to let the FCC know whether they support or oppose Bell Atlantic's petition. New York is widely viewed as the most competitive of any local market, though that may not be competitive enough given the dismal state of competition in local markets. Most observers agree, however, that Bell Atlantic's New York market will probably be the first to go; if not through this petition, then soon. Is it time for users to support BOC entry into long distance? teledotcom.com