Off-topic rant & rave...
As a taxpaying American citizen, I object to the Justice Department spending my money to FILE SUIT (!) against WCOM and FON to block a merger. Don't they have some criminals to prosecute? Or did crime disappear while I wasn't looking?
(I'm not in either stock at the moment....took some profits in them long ago, so that's not the point of this rant)
Interesting post from WCOM thread:
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Sprint Statement in Response to Department of Justice Lawsuit in Opposition to Merger
KANSAS CITY, Mo., Jun 27, 2000 /PRNewswire via COMTEX/ -- The following statement should be attributed to J. Richard Devlin, Executive Vice President and General Counsel for Sprint:
"Sprint has been notified by the Department of Justice of its intent to file suit to block the company's merger with WorldCom. We are disappointed that we have been unable to convince the Justice Department that the merger is in the best interest of the American public and would advance competition. Over the next several days we will determine our next steps.
The company believes it has presented an overwhelming case in support of the merger, including the following points:
* The merger would be the nation's best chance to avoid a developing
duopoly in the consumer marketplace between the mega-BOCs and the
AT&T/cable entity. Prior decisions by the Justice Department and other
regulators have allowed providers of monopoly local telephone service
to combine to a point that two- thirds of all telephone lines are
controlled by two mega-BOCs: SBC and Bell Atlantic/GTE. At the same
time, AT&T received approval to acquire cable giants TCI and MediaOne,
allowing it to control the second line to the home. The proposed
Sprint-WorldCom merger would create a company of comparable size and
scale that would be able to break this impending duopoly. Through
joint development and implementation of a new broadband wireless
technology using MMDS frequencies, the new company would reach more
than half of the homes in the United States. The merger would also
increase the availability of bundled service packages, including Sprint
ION, over a larger customer base, resulting in improved economies of
scale, lower costs and lower prices for consumers.
* The merger would create a more complete and effective competitor, not
only against the mega-BOCs and AT&T, but against foreign
telecommunications companies as well.
We also are disappointed that we've been unable to convince the Justice Department to look at the dramatic changes occurring in the telecommunications market and not be swayed by 1998 market share data (the latest year for which full data was available). The Justice Department's historical focus caused them to either miss or discount the following:
* The effect of surplus capacity and ease of entry. Extraordinary amounts
of long distance transmission capacity are being added each year. In
addition to AT&T, WorldCom and Sprint, some 10 different companies now
have at least 10,000 fiber route miles across the United States. As a
result of these large, technologically- advanced networks coming on
line, Sprint and WorldCom together will have only about 6 percent of
the bandwidth in this country by year end 2001. New entrants are
evident at the retail level as well. In consumer long distance, new
carriers have gone from about 6 percent market share in 1995 to over 20
percent in 1999. (In contrast, Sprint's share of consumer long distance
is about 6 percent in 1999.) Similarly in business long distance, new
carriers have captured nearly 25 percent of revenues. There is simply
nothing the merged company could do to hold back or reverse these
competitive developments.
* The effect of the surplus and new entrants on pricing. Prices in all
segments of telecommunications have been plummeting. Pricing pressures
will remain strong after the merger because of ease of entry and
marketplace dynamics. If the merged company did not offer competitive
pricing, customers would simply go elsewhere.
* Regardless of any decision on the Sprint-WorldCom merger, the consumer
long distance marketplace is changing irrevocably. Despite declining
prices, demand for traditional stand-alone long distance is declining
due to the emergence of telecom packages, wireless substitution, and
the Internet (e.g., instant messaging, e-mail, voice over the
Internet). Blocking the merger will not stop these trends, but would
limit Sprint and WorldCom's ability to address these changes.
* The pervasive effect of RBOC entry into long distance. The effect of
RBOC entry is known. Where incumbent telephone companies can offer long
distance services, they have captured between 30 to 40 percent of total
long distance revenues. Bell Atlantic captured more long distance
customers in New York City in its first 88 days than Sprint has after
15 years in that marketplace. Unquestionably, RBOC entry will create a
competitor that will dwarf the consumer business of Sprint and WorldCom
combined in a very short period of time.
* The migration of packet data services from X.25, frame and ATM to
Internet-based solutions. The DOJ expressed great concern that the
merged company would have a impermissibly large share of X.25, frame
and ATM service failing to take account that customers are moving to
more advanced technologies such as the Internet. The DOJ also failed
to take account of substantial actual entry (e.g., Qwest, Level 3,
Broadwing) and announced entry by foreign carriers (e.g., France
Telecom, Deutsche Telekom).
While we are disappointed that we could not reach an accommodation with the Department of Justice, we look forward to seeing the complaint because we don't understand the government's case. For example, the Justice Department has long maintained that stand-alone long distance is a discrete antitrust market, yet in recent discussions, the Justice Department insisted that any divestiture would have to include both Sprint's long distance business and its local telephone operations. Those positions are difficult to reconcile.
The companies provided over 3670 boxes of documents; numerous CD-ROMs; 4,209 pages of interrogatory answers and responses to more than 10 informal requests for information. In addition, senior executives of the companies made more than 25 detailed presentations in an effort to explain the business. In contrast, the Justice Department declined to engage in any discussion on the basis for its conclusions. For example, the parties submitted an econometric model that showed no price increases would occur in consumer long distance as a result of the merger. As it should happen, the model and its author were subjected to intense analysis and scrutiny by the Department of Justice staff. Meanwhile, the Department of Justice asserted that it has a model showing price increases but was unwilling to show that model to the parties.
Sprint hopes that a sensible conclusion to this merger can be reached. The public benefits are too great to pass up." Source: Sprint |
