Panel: BOC, IXC mergers are inevitable

WASHINGTON—A panel speaking yesterday at an investor conference sponsored by the Precursor Group said that mergers between the Bell companies and interexchange carriers are surely coming. But while they would come under enormous regulatory scrutiny, they would not be dismissed out of hand, suggested a United States Department of Justice official.

“Mergers and acquisitions might be the only way that the industry will evolve,” said Donald Russell, a partner in the law firm of Robbins, Russell, Englert, Orseck and Untereiner. “There is some room for consolidation. It’s inevitable, and soon.”

Charles Rule, a partner in the law firm of Fried, Frank, Harris, Shriver & Jacobson, agreed that such mergers are inevitable but said any such merger would result in “an interesting battle” concerning anti-trust issues.

“The AT&T decree has iconic status,” he said. “It will be difficult for the department of justice to deal with the reintegration of the Bell companies.”

Should the proposed reallocation of responsibilities between the DOJ and the FCC come to fruition—negotiations are ongoing and have reached the Senate, according to sources—mergers involving communications companies would land in the lap of the DOJ. Deborah Majoras, DOJ deputy assistant attorney general for antitrust, said the Justice Department would be up to the task. “We handle mergers in converging industries all the time. It’s what we do. And we have case law to guide us.”

She added that the DOJ is interested only in ensuring that consumer interests concerning competition are protected and hinted the department would not immediately take exception to a Bell company/IXC merger. “We take each merger one by one on the merits,” she said. “But we don’t decide how markets develop.”

Majoras dismissed the notion that the AT&T breakup represents such a powerful precedent that the DOJ would be reluctant to deviate from it.

“There’s no huge psychological hurdle to overcome. There’s no time or room for emotion,” she said. “It’s our job to put aside that sort of nonsense. We look at mergers from a legal perspective only. I’m sure that’s the approach we would take with any Bell/long-distance merger.”

However, there are many who would be worried by Bell/IXC consolidation, said Rule, which will result in enormous pressure eventually placed on the DOJ or whomever ultimately gets jurisdiction. “They’re going to spend a lot of resources to persuade the agency that there are non-emotional legal reasons for them to take action against a merger,” Rule said. “Twenty years after the breakup of AT&T, it seems to be coming back together.”