DOJ Demands That Telcos Divest Some Assets

To ensure that businesses aren't left without competitive offerings following the acquisition of the two largest long distance carriers by the two largest local telephone companies, the Department of Justice said today that it will require the telcos to d

To ensure that businesses arent left without competitive offerings following the acquisition of the two largest long distance carriers by the two largest local telephone companies, the Department of Justice said today that it will require the telcos to divest portions of their fiber-optic networks in 19 cities.

Without this condition, some business users in those cities would face higher telecom prices as a result of Verizon Communications Inc.s purchase of MCI and SBC Communications Inc.s purchase of AT&T Corp., the Justice Department said.

In eight cities, including Boston, New York, Philadelphia and Washington, D.C., Verizon and MCI are the only carriers that control direct wireline connections to a total of 350 buildings. The two companies compete with each other in those areas today, and following the merger there would be no alternative offering for the business customers in those buildings.

Resource Library:

In a similar fashion, SBC and AT&T are the only carriers that control connections to more than 350 buildings in 11 cities, including Chicago, Dallas, Detroit, Los Angeles, San Diego and San Francisco.

In each of the 19 cities, Verizon, based in New York, and SBC, based in San Antonio, Texas, will have to divest their connections to the buildings to a single buyer under a long-term lease.

Google edges toward telco territory. Click here to read more.

The condition is part of DOJs proposed settlement to a lawsuit that it also filed today blocking the merger requests. The mergers require approval from the Federal Communications Commission, which is scheduled to rule on them tomorrow morning. The Justice Department said that it coordinated with the FCC in its investigation.

Opponents of the mergers had sought more extensive conditions that would promote competition in residential services and Internet backbone services as well, leading some analysts to view todays DOJ decision as modest.

"This represents a very significant victory for the Bells," said Blair Levin, analyst with Legg Mason Wood Walker Inc. in Washington. "We believe there is no chance the court would overturn the settlement."

MCI is based in Ashburn, Va., and AT&T is based in Bedminster, N.J.

Check out eWEEK.coms for the latest news, views and analysis on voice over IP and telephony.

Reader Comments: DOJ Demands That Telcos Divest Some Assets >>> Be the FIRST to comment on this article!

>>> More VOIP & Telephony Articles          >>> More By Caron Carlson