Senate Explores Telco Mergers

Verizon Communications and SBC Communications had an easy time convincing U.S. House members that their plans to buy the country's two largest long-distance carriers are a good idea.

Verizon Communications Inc. and SBC Communications Inc. had an easy time convincing U.S. House members that their plans to buy the countrys two largest long-distance carriers are a good idea. The two companies face a different response in the Senate, however, where lawmakers are mulling ways to promote competition following the transactions.

Saying the deals have met with "an unusually friendly reception" in the House, Sen. Mike DeWine, R-Ohio, cautioned that more scrutiny is needed. "One might normally expect that mergers worth $23 billion, combining four of the countrys leading phone companies, would raise great concern among those who follow the industry," DeWine said.

Ivan Seidenberg, CEO of Verizon, and Ed Whitacre, CEO of SBC, have testified before the House and Senate that consolidation of the telecommunications industry would not adversely affect competition, maintaining that the RBOCs (Regional Bell Operating Companies) do not compete head-to-head with their acquisition targets, MCI Inc. and AT&T Corp., respectively. A number of prominent senators are now voicing concern that business users with only a local or regional presence may end up with no choices in service providers.

"Wire line, wireless, cable—these services are inherently different, much like trains, planes and automobiles, all of which provide a similar service, but in different ways, with different pluses and minuses," DeWine said last week.

To help ensure that VOIP (voice over IP) services will be offered competitively, DeWine suggested telephone companies be required to sell DSL services separately from other services. Several other potential new conditions surfaced in the Senate last week, including the divestiture of overlapping network facilities.

Sen. Herbert Kohl, D-Wis., floated the possibility of forbidding companies from blocking other providers Internet traffic and outlawing lobbying efforts seeking to stop municipalities from building their own wireless networks.

DeWine and Kohl, who is chairman and ranking Democrat on the Senate antitrust subcommittee, will hold additional hearings on the mergers next month.