FCC approval likely for latest merger

The proposed merger of MCI WorldCom and Sprint will pass regulatory review despite harsh words by FCC Chairman William Kennard, analysts said last week.

"How can this be good for consumers? The parties will bear a heavy burden to show how consumers would be better off," Kennard said in a statement. The FCC will judge whether the $115 billion deal serves the public interest. The Department of Justice - whose review is more critical, analysts said - will review it for antitrust violations.

"Kennard is blowing smoke," said Bruce Egan, a senior research fellow at the Columbia Institute for Tele-Information. The chairman may not like the fact that carriers are merging, but "there's little chance he'll block this one, and I think it'll fly through Justice," he said.

An MCI WorldCom/Sprint merger presents anti-competitive problems in long-distance, Internet and international markets, say the Communications Workers of America.

"We're concerned about concentration in the long-distance wholesale market," added Ernest Kelly III, president of the Telecommunications Resellers Association.

Regulators are expected to force a sell-off of Sprint's Internet back-bone, which is smaller than MCI WorldCom's, and they may focus on potential impacts on the long-distance market when examining the merger, analysts said.

"The issue is do consumers have a choice?" said George Reed-Dellinger of HSBC Washington Analysis. With AT&T, about 1000 resellers, wireless carriers and now RBOCs on the horizon, "there's still a lot of competition out there," said John Dorfman, a consultant at The Strategis Group.

If approved, the merger could put more pressure on the FCC to let RBOCs enter the long-distance market to add competition, if only on a state-by-state basis, analysts said.