Three recently announced telecommunications mergers received mixed reviews in a U.S. House of Representatives committee hearing Wednesday, with some lawmakers questioning whether the deals will lead to less competition and higher prices.
During a hearing before the House Energy and Commerce Committee, top executives from the six telecom companies involved defended the multibillion-dollar deals announced since mid-December, saying the mergers will ensure healthy companies that will compete with each other and invest in new technologies. The hearing was held as Congress considers rewriting the Telecommunications Act of 1996.
Some lawmakers questioned if SBC Communications Inc.'s acquisition of AT&T Corp. and Verizon Communications Inc.'s intended acquisition of MCI Inc. will leave U.S. telecom customers with two near-monopolies that don't compete against each other in many regions. Representative Heather Wilson, a New Mexico Republican, compared the telecom industry after the mergers to the old AT&T monopoly before the government-enforced breakup in 1984.
"We are almost at this point where we've come full circle over the last two decades," Wilson said. "We've had two decades of vigorous competition and technological innovation ... spurred initially by the breakup of a very large monopoly. We're now on the cusp of seeing the emergence of a duopoly."
SBC Communications' acquisition of AT&T, announced in January, comes at a time when the telecom industry is coming out of a recession, or "trying to get up off the mat," said Edward Whitacre Jr., chairman and chief executive officer of SBC. "We will provide business and residential customers alike with the most complete set of services, over a robust national and international network, using the most advanced technology," Whitacre said.
Executives at Verizon and MCI defended their proposed merger on largely the same grounds, while executives from Sprint Corp. and Nextel Communications Inc. noted that the merger of their wireless businesses will still leave dozens of wireless companies competing for customers. The Verizon deal, announced in February, still faces a competing bid for MCI from Qwest Communications International Inc.
Ivan Seidenberg, Verizon's chairman and chief executive officer, and Michael Capellas, MCI's chief executive officer, didn't specifically address the competing Qwest bid during their testimony, but both said the Verizon deal made the best sense for the two companies.
MCI's worldwide IP (Internet Protocol) network is best matched with Verizon's local telephone and wireless businesses because local and long distance business plans "are on their way to obsolescence," Seidenberg said. "This transaction is about the future. Verizon and MCI will be a national, full-service company with the technology and financial strength to deliver the broadband future and create economic growth for America."
Whitacre and Seidenberg dismissed lawmakers' concerns about a lack of competition by saying that their companies already compete with each other in the wireless space and that they will compete after the merger in the enterprise and residential markets.