Consumer Groups Challenge SBC-AT&T And Verizon-MCI Mergers

A group of consumer advocates has filed arguments with regulatory agencies challenging pending mergers in the telecommunications industry.
A group of consumer advocates filed arguments Thursday with the Justice Department and the Federal Communications Commission challenging pending mergers in the telecommunications industry.

Particularly, the groups -- Consumers Union, Consumer Federation of America, and the U.S. Public Interest Research Group -- objected to the acquisitions of AT&T by SBC and of MCI by Verizon Communications.

"If these mergers go through, the telecommunications market will look a lot like the old days of 'Ma Bell' before AT&T was broken up," the groups argued in their filing. "These two proposed mergers represent a double dose of anticompetitive chutzpah that spells disaster for consumers."

In most markets in which SBC and Verizon are the number 1 supplier, they will strengthen their dominant position by acquiring AT&T and MCI, the groups added.

SBC and Verizon have insisted that their respective acquisitions will improve competition and deliver better and cheaper services to consumers in the long run.

Janee Briesemeister, Consumer Union senior policy analyst, told the Chicago Tribune that SBC and Verizon have track records of disregarding their own promises to compete. The arguments submitted to the Justice Department and the FCC maintain that SBC and Verizon will dominate 90 percent of residential local wireless service, 70 percent of long distance and 40-50 percent of wireless in their regions, if the mergers are approved.

Most observers expect the mergers will be approved, although some overlapping services between the acquiring companies and their targets could be spun off. The Verizon-MCI deal is being challenged by large MCI shareholder Deephaven Capital Management, which hopes to disrupt the merger and drive up the acquisition price Verizon will pay. The SBC-AT&T merger hasn't met with significant shareholder resistance.

The consumer combine also dismissed VoIP as potential competition to the proposed mega mergers, observing that some 70 percent of households don't have broadband connections, which are necessary for Internet telephoning. The consumers added that SBC and Verizon generally won't sell DSL alone, requiring subscribers to purchase a bundle of telecommunication services.

As for the business market, the consumer coalition said it will only be slightly more competitive than the residential market, predicting the business market share enjoyed by the two telecommunications colossi will move above the 80 percentage mark. The consumers also maintained that SBC and Verizon will enjoy "near-monopoly" in the crucial "last-mile" of telecomm service.

Editor's Choice
Brian T. Horowitz, Contributing Reporter
Samuel Greengard, Contributing Reporter
Nathan Eddy, Freelance Writer
Brandon Taylor, Digital Editorial Program Manager
Jessica Davis, Senior Editor
Cynthia Harvey, Freelance Journalist, InformationWeek
Sara Peters, Editor-in-Chief, InformationWeek / Network Computing