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Mergers Raise Concerns Over Internet Access

By Jonathan Krim
Washington Post Staff Writer
Wednesday, February 16, 2005; Page E01

On the surface, the frenzy of telecommunications mergers in the past few weeks raises relatively clear-cut questions for lawmakers and regulators who will be weighing the deals: Will consumers and businesses be harmed if long-distance choices disappear when AT&T and MCI are swallowed by telephone giants SBC and Verizon?

In many parts of the country, the mergers would mean that two of the top three providers of long-distance telephone service are combining, leaving one overwhelmingly dominant player. Ordinarily, such corporate marriages have trouble getting approved.

_____Related Articles_____
Telecom Is Getting Another Behemoth (The Washington Post, Feb 15, 2005)
MCI Rewrote The Rulebook (The Washington Post, Feb 15, 2005)
MCI Chief Repeats the Feat Of a High-Tech Turnaround (The Washington Post, Feb 15, 2005)
_____Telecom Deals_____
The Verizon-MCI deal announced on Feb. 14 is the third major telecom merger unveiled since December.
On Jan. 31, the Texas-based Baby Bell SBC Communications announced its acquisition of AT&T for $16 billion.
In December, two leading wireless phone services -- Nextel and Sprint -- announced that they would merge in a $35 billion deal.


But several experts said they expect as many questions to be raised about whether the phone giants would gain too much power over access to the Internet, especially for large businesses.

Worried representatives of large businesses and consumer groups said they will begin sounding the alarm, at the Federal Communications Commission, the Justice Department and on Capitol Hill.

So far, there is no organized group calling for the rejection of Verizon Communications Inc.'s buyout of MCI Inc. or SBC Communications Inc.'s purchase of AT&T Corp. Instead, in a process that could last a year or more, several organizations said they will press regulators to place conditions on the mergers to help ensure robust Internet competition.

State public-utility officials also intend to play a role.

The focus on Internet services, as well as on long-distance calling, is testimony to the breathtaking changes in the communications landscape over the past several years.

For many consumers, wireless service is a substitute for traditional local and long-distance phone service. Under the administration of outgoing FCC Chairman Michael K. Powell, phone line discounts were eliminated, making it difficult for companies such as MCI, AT&T and smaller players to offer local service over local phone company lines.

Meanwhile, the local phone giants were allowed to enter the long-distance market. Together, these government moves caused the MCIs and AT&Ts of the world to begin withdrawing from serving residential customers. As a result, experts said, regulators would be hard-pressed to reject mergers that eliminated local phone service competitors that already had decided to leave the market because of government policies.

But MCI and AT&T are major providers of "Internet backbone," the large pipes that carry data around the world in the same way that interstate highways are the arteries for long-distance car traffic.


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