Study Warns Telecom Mergers Would Harm Competition
The proposed SBC-AT&T and Verizon-MCI mergers would hurt competition and business in general, the Alliance for Competition in Telecom (ACTel) said Tues. ACTel, made up of smaller telecom competitors, was created solely to prevent the deals from happening and has petitioned the FCC to stop them. ACTel also plans to take its case to the Justice Dept.
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Simon Wilkie, FCC chief economist 2002-2003, said a study he did for ACTel shows elimination of AT&T and MCI as competitors would affect the retail and wholesale markets. Losing main competitors AT&T and MCI means SBC and Verizon would dominate the business market, making it impossible for smaller competitors to gain ground, Wilkie said. ACTel planned a presentation for FCC officials later in the day Tues.
With a stronghold over their territories, SBC and Verizon wouldn’t need to adjust prices to rival those of smaller companies, Wilkie said. Losing competitors “will have a negative impact on the wholesale prices, which will have a negative impact on prices paid by American business,” he said: “Because of the lack of competitive facilities, there will be a diminution of choice for business users and a diminution of incentive to innovate.”
In the wholesale market, AT&T and MCI not only compete by using their own facilities, but also sometimes resell Bell facilities to other CLECs, Wilkie said. The 2nd type of competition occurs when AT&T or MCI leases lines from a Bell to provide service in a building. If the firm doesn’t need all the capacity leased, it resells the excess, he said. Both facilities-based and resale competition would end with mergers, Wilkie said.
Competitors have argued all along that such mergers would hurt competition by eliminating major competitors. ACTel will use Wilkie’s analysis to buttress that argument. CompTel/ALTS Pres. Earl Comstock, who joined the news conference, called the situation serious enough that placing conditions on the 2 mergers might not be effective. The Bells in the past have violated merger conditions, even if it has meant paying FCC fines, he said. This time, the FCC and DoJ shouldn’t approve the mergers, Comstock said. Such action wouldn’t be unprecedented, since major mergers such as Sprint- WorldCom have been turned down, he said. Another possibility raised by Wilkie: Divestiture of AT&T and some of SBC’s dark fiber could produce 3 new competitors. A similar solution would apply to Verizon-MCI, he said.
Verizon-MCI and SBC-AT&T reacted skeptically to ACTel’s claims. Separate statements challenged ACTel’s accuracy, calling the coalition’s research incomplete and biased. According to SBC/AT&T, the data drastically overstate the number of buildings connected to AT&T in several territories. “This material is entirely predictable, given the interests of those behind it,” said the Verizon/MCI statement. “It ignores the facts, tries to create some new ones, and relies on 20- year-old assumptions.”