House Judiciary Leaders Raise Concerns Over Telecom Mergers
House Judiciary Committee leaders voiced concern about mergers in the telecom industry Wed., saying consolidation is undermining the 1996 Telecom Act’s goals. Both Republican and Democratic leaders spoke out on consolidation and competition during the hearing, which addressed telecom mergers but not specifically the proposed SBC-AT&T and Verizon-MCI mergers. House Judiciary Committee Chmn. Sensenbrenner (R-Wis.) repeatedly has said the Act includes antitrust provisions. A Committee “background” statement Wed. said: “This consolidation has created what some perceive to be a telecom oligopoly comprised of a diminishing number of Baby Bells that increasingly resemble the Ma Bell monopoly from which they were created.” Sensenbrenner was absent from the hearing.
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Rep. Cannon (R-Utah) was acting chmn., and no less critical of consolidation. “The competitive landscape envisioned by the Act has not been realized, and is receding,” Cannon said. With new services such as VoIP emerging, Cannon said antitrust law is essential to “prevent vertical monopolization of broadband and the Internet backbone.” Cannon also said the Judiciary Committee will play a “vital” role in any Telecom Act rewrite.
Cannon said the proposed mergers in the telecom industry would lead to 2 firms controlling 80% of the business telephone market and as much as 2/3 of the RBOCs residential customers. “Recent vertical and horizontal industry consolidation has created what some perceive to be a telecommunications oligopoly comprised of a diminishing number of RBOCs that increasingly resemble the Ma Bell monopoly from which they were created and that do not compete in local interregional markets,” he said. Cannon questioned Michael Kellogg, of Kellogg, Huber, Hansen on behalf of USTA, on why DSL was “on RBOC shelves” until competition from the Act forced the Bells to deploy the high-speed service. He also asked why only Qwest is offering stand-alone DSL without requiring phone service, the so-called “naked DSL.” Kellogg said Verizon also is preparing to offer naked DSL.
House Judiciary Committee ranking Democrat Conyers (Mich.) said the telecom mergers would drive up costs and reduce consumer choice. Kellogg said consolidation of CLECs was good for competition, creating a “stronger market” because it meant better competitors. He pointed to XO Communications, which testified at the hearing on behalf of CompTel/ALTS, as an example of a strong CLEC competitor. In his statement, Kellogg said recent FCC action to eliminate unbundling rules helps the industry by creating more viable competitors and encouraging investment. Kellogg described the FCC’s UNE-P system as a “cradle-to-grave welfare system for bogus business models.” He also said the FCC bore a “fair share of the blame” for the telecom bubble bust of the late 1990s because of its “mismanagement” of UNE-P.