In the Internet world, local or regional networks allow businesses, institutions and consumers to get to the main Internet pipes. These networks often are owned by the local phone companies, which charge for access to the backbone.
The fees charged for those connections are rising and have been the subject of "a running gunfight for years," said Brian R. Moir, president of the E-Commerce & Telecommunications Users Group, which represents large industries and institutions such as universities that send and receive huge volumes of Internet traffic.
_____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. | | |
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With the prospect of Verizon and SBC owning two of the biggest backbone providers in AT&T and MCI, Moir said, his members fear a possible squeeze. The FCC decided in January to review those connection rates, which Moir said should be part of any merger examination.
Moreover, he said, whereas AT&T, MCI and the large local phone carrier in a given region once would bid on providing long-distance and data services for large businesses or government agencies, there would now be one fewer bidder.
The danger, Moir and others said, is that SBC and Verizon could use their ability to bundle soup-to-nuts telecommunications services for businesses in ways that could make it impossible for rivals to compete.
At the moment, there is so much backbone capacity that prices are falling. And there are several other backbone providers.
But if the mergers are approved, "Verizon and SBC are well-positioned to dominate and make it more difficult for other backbone providers to offer packages of services," said Gene Kimmelman, head of the Washington office of Consumers Union.
Michael E. Glover, a Verizon attorney, responded that the acquisition of MCI would allow his firm to compete for global business with AT&T for the first time.
He also disputed Moir's assertions that network connection costs are going up.
Blair Levin, a former FCC official and now a telecommunications analyst for the investment firm Legg Mason, agreed that integrated phone and Internet backbone giants could jeopardize competition.
"You can do bundling so it can be discriminatory," he said.
Levin added that regulators might look closely at whether AT&T, for example, should be forced to give up some local facilities that allow customers to connect directly to its backbone.
The recent mergers, which also include a proposed combination of Nextel Communications Inc. and Sprint Corp., come when many in the industry and on Capitol Hill want to take a fresh look at the 1996 Telecommunications Act, which was passed before many Internet services were developed.
But Levin said he expects any legislative action to follow the antitrust reviews.
"Mergers are the 800-pound gorilla on all policy proceedings," he said.
