TELECOM Digest OnLine - Sorted: Questions About Verizon-MCI Merger

Questions About Verizon-MCI Merger

W. David Gardner (
Sun, 10 Jul 2005 22:08:59 -0500

By W. David Gardner,

New York State's Public Service Commission has expressed concern that
Verizon Communication's proposed takeover of MCI could produce
significant consolidation in large and medium business markets.

In a white paper issued this week, the PSC termed the consolidation
"troubling" and offered some tentative remedies aimed at ensuring that
smaller telecom providers could "continue to provide their services to
medium and large customers, thereby preserving customer choice."

Verizon is proceeding with plans to acquire MCI after a long battle
with Qwest, which eventually dropped out of the bidding for MCI.

In its analysis of the pending acquisition, the PSC noted that it also
reviewed the acquisition of AT&T by SBC Communications. The PSC
expressed few reservations about that transaction, however, because
SBC has little presence in New York State and, therefore, its
acquisition of AT&T would likely have little impact on business and
residential users in the state. Verizon is the major
telecommunications carrier in New York State.

Even so, in its report, the PSC cited comments made by some
petitioners that "the combined post-merger scenario could provide a
powerful incentive for SBC and Verizon to engage in 'tacit collusion'
by not competing in each other's territories" In the wake of the
breakup of AT&T two decades ago and the subsequent consolidation of
the nation's telephone systems, consumer groups have complained that
major telephone companies including Verizon and SBC have been
re-monopolizing telecommunications.

In a statement released Thursday, Verizon took note of the 78-page PSC
report. Thomas McCarroll, Verizon's vice president for regulatory
affairs in New York and Connecticut, said the New York communications
marketplace is "robustly competitive."

He added: "The facts show that the combination of Verizon and MCI will
create a strong new competitor whose customer focus and commitment
will allow us to better offer innovative new services, packages and
products, particularly to the major businesses now served by MCI,
without negative effects on competition in any aspect of the market."

In its analysis of the Verizon-MCI merger, the PSC suggested that one
remedy to instill competition in business enterprise markets would be
for smaller carriers to be entitled to receive the same rates and
conditions for three years for the wholesale services they have been
receiving from MCI.

Addressing IP delivery, the PSC suggested a pro-competitive measure
requiring Verizon to offer "naked DSL" so its customers could "take
advantage of the burgeoning Voice over the Internet Protocol (VoIP)
market without also subscribing to Verizon's telephone service."

The PSC also suggested that MCI could offer its retail residential
service for a year after approval of the merger.

Copyright 2005 CMP Media LLC.

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[TELECOM Digest Editor's Note: Prior to any FCC approval of mergers
between Verizon-MCI or SBC-AT&T the Comission should absolutely
_insist_ upon making 'naked' or 'dry' DSL a definite requirement from
telco as well as total UNE-P networks for companies like Gage and
Prairie Stream. If no naked DSL and/or no UNE-P, then no merger. That
would be my attitude. PAT]

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