At a briefing Monday on mega-mergers in the telecommunications industry hosted by the American Antitrust Institute, a senior research associate in economics at the California Institute of Technology warned if the deals go through as planned, then they would force telecom users to pay more for existing services.

"The question is whether there will be competition after completion (of the mergers), or whether there will be a small increase in price - and there will be," said Simon Wilkie, who also is a former chief economist at the Federal Communications Commission.

At issue is the possibility of SBC Communications joining forces with AT&T on the one hand, while Verizon Communications currently is negotiating with MCI to merge on the other.

The stakes are huge, with the SBC-AT&T deal estimated to be worth around $16 billion, according to Ed Whitacre and Dave Dorman, the heads of the two companies. They said they hope the deal will be finalized by next year.

Verizon, meanwhile, is planning a merger worth $8.5 billion with the financially struggling MCI, after Qwest dropped out of the competition to bid for MCI earlier this month.

The two deals would create the biggest and second-biggest telecommunications companies in the country, and the corporations involved argue that the mergers would boost their cost efficiency and provide better service to their customers.

Both proposals, however, have come under attack from some industry analysts as well as attorneys, and the AAI representatives have said repeatedly that the plans simply would lead to less competition and create a monopoly in a lucrative industry.

Both the Department of Justice and the Securities and Exchange Commission are looking into whether the mergers would violate anti-trust regulations.

Wilkie said if the two deals go through as planned, they would lead to a 5 percent increase in prices paid by phone customers.

Meanwhile, Jonathan Rubin, a senior research fellow at the AAI, said the proposed mergers should not be permitted under the Telecommunications Act of 1996, which was enacted to encourage competition among carriers and lower prices for consumers.

The merger plans do "not satisfy the goals of the 1996 act," Rubin argued, noting that the two resulting telecom super-giants would be able to carve out the market unto themselves with little competition between the two.

That view was echoed by Lee Selwy, president of Economics & Technology Inc. and adviser to the National Association of State Utility Consumer Advocates.

The two deals would restructure the telecommunications market in the United States to look not "unlike that of 20 years ago," when there was a clear monopoly by the Bell group, Selwy said.

Rubin noted that the mergers would give the resulting companies global long-haul networks, Internet lines, local networks and the ability to close their networks to outsiders, effectively excluding competition.

"Under such conditions ... the mergers plan must be rejected," Rubin said.

Shihoko Goto is UPI's Senior Business Correspondent.

All rights reserved. Copyright 2004 by United Press International. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by United Press International. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of by United Press International.

Community
Email This Article
Comment On This Article

Related Links
SpaceDaily
Search SpaceDaily
Subscribe To SpaceDaily Express
The latest information about the Commercial Satellite Industry

Memory Foam Mattress Review

SPACE MEDIA NETWORK PROMOTIONS Solar Energy Solutions Tempur-Pedic Mattress Comparison ... Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News