WorldCom-MCI's world of fear
Foes of the mega-deal foresee Internet domination,
but threat of government intervention makes it unlikely
By David Bowermaster
MSNBC
March 12 - WorldCom's proposed $37 billion
purchase of MCI has taken a public pounding
this week over concerns that the deal would
create an uber-telecom capable of dominating
the Internet backbone and bending all Web
surfers to its will. That is a legitimate concern
and a realistic possibility - but it's not going to
happen.
WorldCom, MCI shareholders approve merger
Justice widens investigation in WorldCom-MCI dealings
Does Qwest-LCI make sense?
Think a merged WorldCom-MCI would dominate the Net?
THE CRITICS, who range from competitors like
Sprint and GTE to state attorneys general and consumer
advocate Ralph Nader, worry that a combined
WorldCom-MCI would turn the public Net into a private
toll road.
The wringing of hands actually began last May, well
before MCI was even a twinkle in WorldCom's eye. That
is when John Sidgmore, vice-chairman of WorldCom and
head of its hugely successful UUNet Internet backbone
subsidiary, decided it was time to end the culture of free
rides on the Net.
UUNet announced then that small Internet service
providers could no longer send traffic across its backbone
without paying a fee; only ISPs that possessed financial heft
and network resources comparable to UUNet would be
allowed free "peering" arrangements. All others would pay
anywhere from $2,000 to $6,000 a month.
"These guys [small ISPs] sometimes make this a
political or religious argument, but it's a very simple financial
issue," Sidgmore told Telephony Magazine. "There's no
danger these guys will go out of business as long as they can
come up with a few thousand dollars per month."
At the time, the "guys" Sidgmore was referring to were
mom-and-pop ISP's with only a few hundred or a few
thousand Internet subscribers.
Because a combined WorldCom-MCI would account
for more than 50 percent of all Internet connections, the fear
now is that almost every other ISP will become one of the
"guys," and that WorldCom-MCI could charge them a lot
more than a few thousand dollars per month to connect to
its network.
Would a combined
WorldCom-MCI be
bad for Internet
consumers?
No, threat of
government
regulation would
keep the
company from
unfairly raising
rates.
Yes, prices will
go up slowly, but
surely.
"It's basically a share game," says Jack Rickard, who
keeps close tabs on the Internet backbone as editor of
Boardwatch magazine. "If I have a large enough share of
customers, and I tell you I will not exchange traffic with you
anymore except under my terms, you have the choice of
either just not sharing traffic or accepting my terms."
Not sharing traffic with WorldCom-MCI is not much
of an option for any ISP, since it would mean denying their
subscribers access to the thousands of other ISPs and Web
sites that link up to WorldCom-MCI's backbone.
Yet some critics of the WorldCom-MCI deal falsely
claim that there is virtually no where else to go for backbone
services. Indeed, in a paper for the Economic Policy
Institute released earlier this week, Jeff Keefe, a professor
at Rutgers University's School of Management and Labor
Relations declared: "After the merger all backbones will
either be owned by WorldCom-MCI or will operate on
facilities leased from WorldCom-MCI, except for those
using Sprint's facilities."
Not exactly. Along with Sprint, AT&T and GTE have
their own backbone facilities. Likewise, IXC
Communications has backbone capacity used by PSINet,
and Qwest Communications is building a 16,000-mile,
fiber-optic network that will be used by GTE, AGIS and
other backbone providers.
"There are alternatives. It's not as narrow a field as is
being portrayed by some who are crying foul here," says
Rebecca Wetzel, director of Internet consulting for
TeleChoice.
WorldCom vice chair John
Sidgmore put an end to free
rides on UUNet's backbone last
May.
Still, the Internet remains a network
of networks, and even formidable
alternative carriers like Sprint and GTE
are going to need to connect with
WorldCom-MCI at certain points. The
question is whether WorldCom-MCI will
decide to go for the green and impose stiff
fees for even those companies to link up
to its network, or deny access to its backbone altogether.
Such a move might provide a sweet financial windfall,
but it could also backfire by prompting government
overseers to impose on the Internet the types of legal
checks and balances that currently control the rest of the
telecommunications industry. Fear of such government
intervention is likely to keep WorldCom in check.
"If they don't behave in such a way that allows
competition to continue, then they may bring regulatory
wrath down on their own heads," says Wetzel. "If they
behave themselves, it won't happen."
Consumer advocate Ralph
Nader will rally opposition to
the merger in Washington,
D.C., on Friday.
Whatever WorldCom and
MCI decide to do, their chances
of doing it outside the public eye
are slim.
Ralph Nader and the
Communications Workers of
America will hold an all-day
conference in Washington, D.C.,
on Friday to highlight the
Internet-related dangers of the
proposed merger. (The CWA, though it doesn't represent
workers at either WorldCom or MCI, is lobbying against
the combination, fearing consolidation in the Internet will
lead to lost jobs.)
And next week, virtually the entire ISP industry will
convene at ISPCON '98 in Baltimore, along with members
of the Federal Communications Commission and the
Federal Trade Commission. The implications of the
WorldCom-MCI deal are expected to top the agenda.
Surprisingly, organizers of the conference say no
representatives from either company have made plans to
attend. |
