And Then There Were 2

For large companies, the telecommunications industry is consolidating down to the Big Two.

Verizon Communications' decision last week to acquire MCI for $6.7 billion came two weeks after SBC Communications said it will buy AT&T for $16 billion. In each case, one of the largest regional telecom companies is buying one of the nation's top long-distance operations, creating two companies that will be able to offer wired and wireless voice, data, and video services over local, national, and global networks. The four took in 56% of the $138 billion companies spent on business communications last year, according to the Yankee Group.

SBC and Verizon are using the deals to buy their way into the business market. AT&T has around 3 million business customers; MCI has around 1 million. SBC and Verizon have lacked the reach and services to win many nationwide contracts from large companies. "Outside of the big two, there is no competitor out there that a Fortune 1,000 company will move all of their traffic to," says Gartner VP and research fellow Ken McGee. "We are entering a period where we might actually see rates rise again."

Still, Verizon's move to buy MCI "creates a much stronger battle between the big two," says David Willis, a VP at research firm Meta Group. "There will still be many aggressive alternative carriers in the market to provide additional competition."