Telco Mergers Face Competition Concerns

AT&T, Verizon Mergers Face Competition Concerns
From ReutersJuly 13, 2006WASHINGTON

— A federal judge Wednesday expressed doubts about government settlements reached last year that permitted SBC Communications Inc. to buy AT&T Corp. and Verizon Communications Inc. to acquire MCI Inc.

U.S. District Judge Emmet Sullivan said at a hearing that he might hold further proceedings and call witnesses to make sure that the antitrust settlements reached with the companies went far enough to resolve concerns about competition. "I have doubts about that," the judge said at the beginning of a hearing. "So I need to have the parties address that." Sullivan's reservations could be an obstacle to the deals because federal law requires antitrust settlements to be reviewed and endorsed by a judge before becoming final. Those reviews traditionally have been perfunctory. However, Congress modified the antitrust laws in 2004 giving judges more leeway to examine settlements more closely.

A telecommunications analyst who attended the hearing said he did not think the judge's review would pose a serious problem for the deals. "I haven't heard anything in there that makes me think there's a substantial threat to the ongoing implementation of the mergers," said Paul Glenchur of the Stanford Washington Research Group. A lawyer for the Justice Department, Claude Scott, told Sullivan that the department had painstakingly reviewed the transactions. He said it spent eight months and 24,000 hours of staff time while conducting 300 interviews to investigate any possible competition concerns. Scott said the government's consent decrees leave "a vibrant market where there are a lot of competitors out there."

The Justice Department's antitrust division agreed in October to allow the two large deals to go forward on the condition that they lease competitors access to telecommunication lines in more than 350 buildings in each of the companies' territories. San Antonio-based SBC changed its name to AT&T Inc. after the merger, which made it the largest U.S. telephone company. New York-based Verizon is the second-largest.