A 'lop-sided' merger of equals

Last week both Bell Atlantic and GTE said they would bring a lot to the table for Internet access.

Bell Atlantic CEO Ivan Seidenberg said that because GTE has one of the industry's most sophisticated data networks and Bell Atlantic serves such a huge percentage of the nation's business and residential customers, the merger is a good way to bring strong technology to millions of people.

But analysts said the deal is not quite equal in this area.

"It's a lop-sided merger in the Internet area more than any place else," said Pete Dailey, partner at Frost & Sullivan.

GTE provides dial-up Internet access to more than 300,000 customers and owns BBN Technologies, which operates a nationwide Internet backbone. Bell Atlantic has a much smaller Internet operation and provides service to residential and small business customers only. GTE, on the other hand, serves large and small businesses, residential and carrier customers.

Neville O'Reilly, director of Internet consulting for TeleChoice, agreed that GTE has more to offer but said Bell Atlantic's work in high-speed access will increase its side of the bargain.

"[Bell Atlantic] is doing a lot with ISDN and [digital subscriber line] that will make the deal more symmetrical," he said.

It looks as if the agreement just adds another customer to GTE's backbone, said Clif Holliday, director of B&C Consulting and a former GTE executive. But adding Internet customers is just part of GTE's data network strategy, which will expand as a result of the merger, he explained.

Interestingly, it is precisely because Bell Atlantic has so few Internet assets that regulators may be willing to overlook this part of the agreement, O'Reilly said.

"They could only see it as anti-competitive based on Bell Atlantic's potential for Internet access, and regulators are hesitant to make predictions about future Internet structure."