BT objects to US telco mega-mergers
Published:10-May-2005
By BR staff writer
Concerns over the competitive impact of the proposed mergers of AT&T and SBC Communications and MCI and Verizon Communications are increasing, with BT Group and the New York attorney general among the latest object.
BT met with US Federal Communications Commission. staff late last week to ask the regulator block the two mergers, saying that they would create a "classic duopoly" in the telecommunications market, and consolidate control of the internet backbone.
The UK incumbent carrier said the mergers "will significantly impede effective competition, resulting in higher prices, lower quality and reduced innovation for business customers", according to a FCC filing released yesterday
AT&T is being acquired by SBC for $16bn, while Verizon is currently the approved frontrunner to pick up MCI for $8.5bn, a drastic consolidation of the US carrier market that needs separate regulatory approval before they can be closed.
According to BT, allowing the SBC-AT&T merger would give the merged company the ability to "abuse its dominance" over the local loop. This would be compounded, the company said, by a simultaneous Verizon-MCI deal.
BT estimates that 50% of the relevant market is US-based and that SBC's and Verizon's geographic franchises cover 70% of customer locations. It these regions, 98% of businesses do not have alternate suppliers, BT claims.
"Left unchecked, the coordinated effect of the mergers would be to create a powerful duopoly," BT said, "not just in their own regions but nationwide and internationally, that would be difficult or impossible for any other competitor to overcome."
BT lists the competitors in the "global telecommunications services" market as itself, Colt, Cable & Wireless, Global Crossing, Equant, T-Systems and Vanco.
BT is also concerned that the two mergers could allow the firms to consolidate their positions in internet backbone traffic handling, passing their local traffic onto their preferred backbone, stifling competition.
While BT, which is trying to protect its own business, is the biggest corporate entity to object to the mergers so far, smaller firms and regulators have also expressed interest in the outcome of the two regulatory reviews.
New York Attorney General Eliot Spitzer, known as one of the fiercest consumer rights activists in elected office in the US, did not object to the mergers outright, but asks the FCC consider two potential problems that mirror BT's concerns.
First, Spitzer said Verizon should be forced to offer naked DSL, that is broadband internet connectivity without the requirement to take phone service, if it buys MCI.
It should also be dissuaded from preferentially routing IP over MCI's internet backbone, Spitzer said. Combined, BT's "duopoly" would control over half of the internet's backbone assets, Spitzer claimed.
Also expressing some concern over the deals is Vonage Holdings, the private company that is becoming a bit of a player in the voice over IP space.
While Vonage, fresh from inking a deal with Verizon to handle 911 emergency calls, did not object to its merger with MCI, it did raise some areas of concern that it said the FCC should address before approving the mergers.
"The FCC should examine whether the merger will negatively affect the ability of standalone VoIP providers to gain nondiscriminatory and reasonable access to: 1) direct tandem access necessary for interconnection to the PSTN and provision of 911 services; 2) number porting; 3) Internet backbone facilities; and 4) wireless platforms," Vonage said.
Also commenting, the fourth-largest consumer ISP, EarthLink Inc, said that the FCC should place restrictions on the merged carriers preventing them from discriminating against other companies in the supply of internet connectivity.
The merged firms may decide to "peer only with each other, or with fewer companies than they peer today" with would have the result of increased fees to companies such as EarthLink, the company said in its filing.
