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Small Telecom Firms Fight Mergers

By Jeffrey H. Birnbaum and Mike Musgrove
Washington Post Staff Writers
Wednesday, March 16, 2005; Page E01

In the big-money world of telecommunications, the little guys are preparing to battle back, but with limited funds, they are plotting to take their attack directly to regulators and antitrust officials.

A half-dozen independent telecom companies led by Reston's XO Communications Inc. have banded together to try to fight the pending mega-merger of SBC Communications Inc. and AT&T Corp. and the possible merger of MCI Inc. with either Verizon Communications Inc. or Qwest Communications International Inc.

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Unlike traditional telecom dust-ups, which have usually involved many millions of dollars and high-profile advertising campaigns, this one will emphasize the efforts of a tight cadre of experts on federal regulation who will make legal and financial arguments to the officials at the Justice Department and the Federal Communications Commission who are tasked with approving the terms of the mergers.

The companies intend to make the case that they will be swamped by the larger companies unless the government puts curbs in place. Their argument will be marshaled by financial data, market research and legal scholarship, rather than the arm-twisting of lawmakers or the courting of the public at large, which are the most common tacks for groups that want to influence the government.

The group, which is so new that it doesn't have a name, has hired as one of its top lawyers Silicon Valley's Gary Reback, who famously pushed the federal government to pursue its antitrust case against Microsoft Corp. and who spearheaded other well-known antitrust lawsuits. Other members of the team are former senior insiders in federal regulatory agencies that have a say in the proposed mergers.

The companies acknowledge that their effort is uphill. "It is a David and Goliath situation" said Carl J. Grivner, chief executive of XO.

But Grivner added, "I'm optimistic that this will get the proper review."

The independents, which provide specialized telecom services to businesses, are angling for ways to continue to provide those services after the mergers. They worry that the mammoth merged firms will stifle the kind of innovation they claim their smaller companies have long provided.

The companies in the group, in addition to XO, are Savvis Communications Corp., Eschelon Telecom Inc., Cbeyond Communications Inc., Covad Communications Group Inc. and Broadwing Communications LLC.

For years, XO and its fellow independents warred against Baby Bells, such as SBC and Verizon, in conjunction with AT&T and MCI. Now that both of their former allies are on the verge of being gobbled up by Baby Bells, the independents have decided to stand together in general opposition to the mergers.


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