Telecommunications Executives Pledge to Boost Competition with Mega-Mergers

Top executives from six major telecommunications companies testified before the Federal Communications Commission, assuring regulators that proposed megamergers will accelerate competition for local phone services. The executives, representing AT&T Corp., Bell Atlantic Corp., GTE Corp., SBC Communications Inc., Ameritech Corp., and Tele-Communications Inc., argued that their respective mergers are necessary to create global giants that can compete against entrenched monopolies. However, some FCC commissioners expressed concerns that these mergers might eliminate potential competitors and stifle competition in local markets.

Key Takeaways:

• The proposed mergers would create two companies, each owning one-third of the phone lines in the United States, leading to increased competition for local phone services, according to AT&T Corp.'s CEO C. Michael Armstrong.
• The new companies would aim to offer phone service through cable lines, leveraging the cable industry's existing infrastructure to expand their reach, as stated by Armstrong.
• Bell Atlantic Corp.'s CEO Ivan Seidenberg acknowledged that the company would not have competed in Los Angeles due to the high cost of building a telecommunications infrastructure from scratch.
• SBC Communications' CEO Edward Whitacre Jr. promised to build local telephone networks in 30 cities, including New York and Washington, if regulators approve its merger with Ameritech.
• The phone companies must be allowed to merge to acquire the necessary employees and financial size to build telecommunications networks that can compete against incumbent monopolies, according to the executives.
• Some FCC commissioners questioned whether the Bell companies would attempt to compete outside their own territories after the mergers are approved.

Statistics:

• The proposed megamergers involve deals worth $32 billion (AT&T Corp. and Tele-Communications Inc.), $53 billion (Bell Atlantic Corp. and GTE Corp.), and $62 billion (SBC Communications Inc. and Ameritech Corp.).
• The two new companies resulting from these mergers would have combined ownership of one-third of the phone lines in the United States.
• The Justice Department previously studied the Bell Atlantic-Nynex merger last year and concluded that "no significant" competition would arise.
• SBC Communications promised to build local telephone networks in 30 cities, including New York and Washington.

Sources:

• "Phone Companies Pledge to Speed Competition," The New York Times
• "Mega-Mergers in Telephone Industry," The Wall Street Journal
• US Federal Communications Commission (FCC) Congressional Hearing