Consumer Groups Rally Against Telecom Mergers

by Roy Mark

Verizon-MCI and SBC-AT&T deals spark concerns over competition.

Consumer groups are rallying to oppose the mega telecom mergers before the Department of Justice (DoJ) and the Federal Communications Commission (FCC). The proposed deals between Verizon-MCI and SBC-AT&T, they say, will work against a competitive market.

Verizon is offering $8.4 billion to acquire long distance carrier and Internet backbone provider MCI. SBC hopes to acquire AT&T for $16 billion.

While both of the Baby Bells are strong in local calling and home and small business broadband, they lack the large IP data service deals between MCI and AT&T with government agencies and corporations.

"The FCC and the DoJ cannot bury their heads in the sand and ignore the destructive impact these simultaneous mergers would have on an already highly concentrated industry," Ed Mierzwinski, U.S. PIRG Consumer Program director, said in a statement.

If approved, Verizon, which boasts 53 million access lines and 3.6 million DSL hookups, gains MCI's IP backbone spanning 140 countries and key enterprise customers, including 75 U.S. government agencies. MCI is also the nation's second-largest long-distance carrier.

SBC has 52 million access lines and 5.1 million DSL connections and would add AT&T's Fortune 1000 accounts and a global network that spans 50 countries.

"We urge regulators to consider both merger applications in the context of these companies' documented track record of flagrant disregard of their own promises to compete, as well as their consistent self-serving, contradictory statements as to the existence of competition in the industry," said Janee Briesemeister, a senior policy analyst at the Consumers Union.

Mark Cooper, the Consumer Federation of America's director of research, said if the DOJ and FCC approve the mergers, Verizon and SBC will attain about a 90 percent market share in residential local wireline, 70 percent in long distance and 40 percent to 50 percent in wireless.

"After a decade of market opening, the two firms being acquired account for three-quarters of the competition in telephone markets," Cooper said. "These are mergers between the No. 1 and a No. 2 or 3 sellers of retail local and long distance, residential and business service, as well as wholesale switching, transport and Internet backbone services."

If the mergers are approved, Cooper added, "The remaining competitors would be minuscule in comparison, lacking the size and geographic reach to provide a competitive check on the two dominant firms."

This article was originally published on Friday Jun 17th 2005