Telecom Executives Back Mergers
Telecommunications executives told a congressional panel Wednesday that three proposed mega-mergers would help the beleaguered industry modernize the nation’s communications networks without hurting consumers.
The hearing, held by the House Energy and Commerce Committee, follows warnings from some experts that the cost of Internet and telephone service could rise with Sprint Corp.’s planned acquisition of cellphone carrier Nextel Communications Inc., SBC Communications Inc.’s proposed purchase of long-distance giant AT&T; Corp. and Verizon Communications Inc.’s bid for MCI Communications Inc. Critics fear that the deals could reassemble much of the Bell telephone monopoly that was ordered broken up by a federal judge two decades ago.
“Once these mergers happen, it sets the clock back 30 years and it looks like a world of the old Ma Bell,” said Gene Kimmelman, co-director of the Washington office of Consumers Union, in an interview outside the hearing.
However, Verizon Chairman Ivan Seidenberg told committee members that his company’s proposed deal would enhance competition because Verizon planned to bolster the operations of struggling MCI, which recently emerged from bankruptcy protection after an accounting scandal.
SBC Chairman Edward E. Whitacre Jr. echoed Seidenberg, saying, “The industry needs to restructure.... The SBC-AT&T; merger is a direct product of those forces of change.”
The committee hearing -- at which consumer advocates, industry analysts and top executives of Nextel, MCI, Sprint and AT&T; also testified -- was viewed by many experts as a prelude to a debate in Congress over a possible rewrite of the landmark Telecommunications Act of 1996. Many argue a new law is needed to cope with technological and regulatory shifts that have helped spur mergers over the last few months.
In the last decade, millions of consumers have jettisoned traditional communications devices such as wired phones and fax machines and embraced new technology such as mobile phones, e-mail, cable modems and Internet-based calling.
“With an industry that has changed so much in 10 years, it should come as no surprise that companies are looking at one another to determine whether partnerships will enable them to be stronger competitors in the new digital world,” Committee Chairman Joe Barton (R-Texas) said.
However, lawmakers were divided in their reaction to the proposed telecom mergers. Several Democrats and some lawmakers from rural areas voiced concern about the potential lack of competition and the willingness of a more consolidated telecommunications industry to bring modern services to rural areas and even inner-city communities.
“In my district, wireless service is spotty,” said Bart Stupak (D-Mich.), whose district in the state’s northern region is sparsely populated. “Even inner-city areas have been skipped over in terms of new technology” such as high-speed Internet access.
Rep. Stephen E. Buyer (R-Ind.) also complained about “the lack of competition to provide broadband in rural areas.”
Although all six industry executives who testified Wednesday said consolidation would fuel a more robust build-out of the public phone network, some experts said mergers might not be the panacea that the industry imagines if government lawmakers and regulators don’t write rules to encourage competition.
University of Colorado law professor Philip J. Weiser, for instance, argued that antiquated federal laws were largely to blame for the lack of telecommunications competition.
“The Telecommunications Act of 1996 is unquestionably broken,” Weiser said in written testimony submitted to the committee. “It did not anticipate the rise of the broadband Internet or even the increased importance of wireless services.... In many important respects, the recent mergers are both a recognition of and a response to this reality.”
