Closed mergers face more scrutiny

Months after the AT&T/SBC Communications and Verizon/MCI mergers were closed, a federal judge may force new conditions on the merging partners.

U.S. District Judge Emmet Sullivan will announce on July 25 what he plans to do, but in a hearing held last week, Sullivan heard seven hours of testimony from attorneys from the Department of Justice, AT&T, Verizon, CompTel and a group called the Alliance for Competition in Telecommunications. Sullivan called the hearing as part of his review of the mergers and an accompanying consent decree under the Tunney Act, a law that requires judges to review mergers to make sure they are in the public interest.

The judge appeared to be prepared to call new witnesses and hear new testimony on the state of post-merger competition, although attorneys for both the DOJ and AT&T insisted that this was unnecessary and not required under the Tunney Act.

The DOJ had approved the two mergers based on agreements with both parties that some fiber-optic facilities would be divested to ensure competition. The facilities in question involved instances in which either AT&T or MCI operated the only competitive fiber-optic cables into a building in SBC or Verizon territory, respectively.

CompTel Counsel Jonathan Lee told Sullivan that the consent decree falls “woefully short” of protecting competition.

It isn't entirely clear what conditions Sullivan could impose on the two merged companies now, although speculation includes a ruling that could require further divestitures.