Competitors urge FCC to put conditions on mergers

Six competing service providers and a group of business customers have come together to ask the Federal Communications Commission to impose conditions, including price cuts, on the proposed SBC-AT&T and Verizon-MCI mergers.

In an ex parte filing, BT Americas, Broadwing Communications, Level 3 Communications, Qwest Communications International, SAVVIS, Inc., and XO Communications joined the Ad Hoc Telecommunications Users Committee in asking the FCC to protect competition by making sure that SBC and Verizon will not be able to restrict access or raise prices once the mergers remove AT&T and MCI from the competitive mix.

“The mergers are likely to be approved – the question is, under what conditions?” said Steve Davis, vice president of public policy for Qwest. “Our concern is that these mergers will significantly reduce competition for special access services in SBC and Verizon regions. The FCC must take affirmative action to ensure that competition continues to grow.”

Prior to the mergers, AT&T and MCI are the two largest competitors to the former Bell companies, and both have operated competitive facilities in major metropolitan areas. One of the conditions the six competitors are seeking would require SBC and Verizon to reduce what they charge for DS1 and DS3 special access lines – the core special access services that competitors use – to what AT&T and MCI have been charging, to ensure the mergers don’t immediately send price shock waves through the industry. The group also asked that SBC and Verizon be prohibited from increasing those rates, and be required to honor existing contracts.

“Historically, the FCC has imposed conditions on mergers of this type – well actually, there has never been on of this type,” Davis said. “But on large communications mergers, they have imposed conditions and have required divestiture. What we’ve never had was a situation where a dominant service provider was merging with its primary competition.”

The group is also asking that current MCI and AT&T customers be given one year after the completion of the mergers to opt out of their contracts with no penalty, and have a six-month transition period to move their services elsewhere.

In addition, the competitors want SBC and Verizon to be prohibited from bundling services in any way that prohibits their customers from using alternative access providers, and from restricting their customers’ use of alternative access in any contractual way, such as requiring customers to give up access to Unbundled Network Elements (UNEs).

Finally, the competitors are asking that SBC and Verizon be prohibited from giving their long-distance partners special access rates that aren’t available to other competitors and that in-region prices be balanced with what’s available outside the franchise territory.

Qwest has separately asked that the FCC force the two companies to divest themselves of overlapping facilities.