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Telecommunications industry

Justice Department Investigates MCI-WorldCom Merger Control Over Internet

Strategic Insights

— 1 min read

The Justice Department's investigation into the planned merger between MCI Communications Corp. and WorldCom Inc. has taken a new turn, with several telecommunications companies receiving subpoenas to gauge the combined entity's control over the internet. The investigation is centered around concerns that a single company controlling a large share of internet traffic could affect both price and service quality. A combined MCI-WorldCom would reportedly account for 20 percent of all internet-traffic revenues, but others estimate that the two companies would jointly control at least half of all internet traffic.

Key Takeaways:

  • The Justice Department has subpoenaed several telecommunications companies, including Sprint Corp. and GTE Corp., to investigate the potential control of the internet by a merged MCI-WorldCom.
  • A combined MCI-WorldCom would account for 20 percent of all internet-traffic revenues, according to MCI spokeswoman Jamie DePeau.
  • However, GTE Corp. and others estimate that the two companies would jointly control at least half of all internet traffic.
  • Antitrust regulators for the European Union have also expanded their investigation into the merger due to concerns over MCI-WorldCom's control over internet traffic.
  • The Economic Policy Institute Study has placed MCI-WorldCom's market share of internet long-distance business at between 48 percent and 68 percent.
  • Measuring one company's control of the internet is difficult because cyberspace is a network of networks, according to Rutgers University professor Jeff Keefe.

Statistics:

  • A combined MCI-WorldCom would account for 20 percent of all internet-traffic revenues.
  • The two companies would jointly control at least half of all internet traffic, according to GTE Corp. and others.
  • MCI-WorldCom's market share of internet long-distance business is between 48 percent and 68 percent, according to the Economic Policy Institute Study.
  • Sprint Corp. would be the second-largest internet backbone provider with a 15 percent share of the market.
  • The Justice Department's test to measure internet traffic patterns will last one week.

Sources:

  • The Wall Street Journal, report of the subpoenas
  • Sydney Shaw, MCI Communications Corp. spokeswoman
  • Jamie DePeau, MCI Communications Corp. spokeswoman
  • William Barr, former U.S. attorney general and GTE's general counsel
  • Jeffrey Keefe, Rutgers University professor
  • Antitrust regulators for the European Union, reported investigation
  • Economic Policy Institute Study, report of MCI-WorldCom's market share of internet long-distance business

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