Timing Out

Is the Sprint-WorldCom deal in jeopardy? Certainly there's real concern about reduction of competition in global long distance as well as concentrating too much of the Internet backbone within one company. However, the FCC recently approved the proposed merger of Bell Atlantic and GTE, clearing the creation of the largest U.S. telephone company. The new company, Verizon, will control a third of the U.S. local telephone market, some 63 million local lines and 25 million wireless customers in 40 states. This is just one of many telecom deals that have floated past scrutiny. So why now and why Sprint-WorldCom? Normally, this apparent rift would surprise me, but besides the competitive issues, I think there are substantial tangential issues and indicators at work here.

The business world is undergoing subtle changes. There's a mood shift in Washington as well as the rest of the country. I get the feeling there's a return to conservatism. Big isn't necessarily better. Outrageous isn't always safe. And the wheels of business aren't as greased as they once seemed.

• More lobby and consumer groups are voicing concerns that there's an evolving domination of the industry by a handful of colossal companies. They suggest that this may be costly to consumers and discourage the kind of innovation and price wars that accompany competition.

• Regardless of which side of the Justice department you fall with the Microsoft case, the ruling suggests that the courts want the company to settle down to a traditional business model that allows for fair competition as has been etched in stone through the ages. It's also sending a strong signal to other up-and-comers that this sort of proprietary, predatory behavior will not be tolerated.

Earlier this month, District Judge Thomas Jackson ordered stringent conduct remedies to take effect in September for the software giant, including breaking up the company. If Microsoft doesn't win in appeals, it will have to adhere to Jackson's conduct requirements.

• After a tremendous bull market for the last 18 months, the stock market seems to be cooling off to post old-school growth increases rather than the get-rich-quick explosions that marked the late 1990s. A number of the dot-com companies are either scrambling to develop realistic business plans or have suffered at their own hands after creating a euphoric self-promotion of success.

• Interest rates are rising steadily. Home starts and purchases are well off the pace of this time last year. Housing starts dropped 3.9% in May, the lowest rate since June of last year. New building permits, an indicator of future home construction, fell 4.3% in May, following a decline of 2.4% in April. The pullback in home building is another sign that the U.S. economy has begun to show slower activity in response to the Federal Reserve's efforts to stave off inflation. Once consumers start settling down, the die is cast for a slower pace.

• The popularity of more conservative political approaches and programs proposed by the candidates in the upcoming November elections also is revealing. If the economy and growth were still on the upswing, you would think that November would be a call for business as usual. In actuality, it seems as though folks believe that the economic boon marking Clinton's presidency is sinking.

• (If these indicators don't suggest something is amiss, Rush Limbaugh may even be calling Monday Night Football games, for goodness sakes.)

I have to wonder if perhaps the Sprint-WorldCom deal is going to be the victim of bad timing. Telecom companies have been merging and acquiring, purchasing like kids in candy stores. At some point, the rules of the model will come under serious fire. If a merger is approved because it only has U.S. regional holdings and still will allow for other competitors, the line might become international interests buying into to U.S. interests or companies with large global interests joining forces. If that line is crossed and approved, what becomes the next line of demarcation?

One of the dozen of mergers was bound to hit snags. Unfortunately, Sprint-WorldCom may end up the example of how the pendulum has swung. If it does, it makes me wonder if NTT DoCoMo or another foreign entity might become the next suitor in line to purchase Sprint. And would it be possible that its timing could be better?

Comments? Write to rwickham@primediabusiness.com.