WorldCom, Sprint face Senate scrutiny over merger

A panel of lawmakers on Thursday pressed officials from MCI WorldCom and Sprint as to whether their potential dominance over the Internet backbone would lead the company to degrade the Internet-based services offered by competitors.

The US Senate Judiciary Committee pitched questions at officials from the two companies at a hearing on the threat to competition the $US129 billion merger might pose to long distance and broadband markets.

Both MCI WorldCom Chief Executive Officer Bernard Ebbers and Sprint CEO William Esrey countered that any notions that the companies would use their combined strength to impair traffic from other providers was unfounded.

But James Rill, an attorney representing GTE, said MCI WorldCom-Sprint's dominance over the information superhighway could lead to such tactics.

"They will be able to control the entry and exit ramps to the Internet. This merger would give the two companies control of the Superhighway and the ability to degradate service," said Rill, who is with the law firm Collier, Shannon, Rill & Scott.

At every mention of a looming "duopoly" between behemoth AT&T and MCI WorldCom-Sprint, Ebbers and Esrey turned the tables. The officials instead urged the senators to look at monopolies in the cable and local telephone markets.

"The broadband battle is basically about the last mile. And in the world of the last mile, two titans are emerging. One is an old titan reborn through local cable facilities - AT&T. The other, ironically, is the offspring of that company - the Bell Operating Companies," Ebbers said.

Ebbers positioned the merger as a gain to commercial customers, since it would allow MCI WorldCom and Sprint to patch any holes in their voice and broadband offerings.

"We will build on our competitive heritage to help open monopoly local markets to competition, to provide the next generation of broadband services, and to offer packages of voice and data, wireless, and wireline services that consumers are increasingly demanding," Esrey said.

Tod Jacobs, a senior telecom analyst at Sanford Bernstein & Co. in New York, who presented at the hearing, however, predicted that Sprint would have to dump its Internet backbone business before the deal is blessed by regulators.

"Rightly or wrongly, Sprint will almost certainly have to divest itself of its Internet backbone business prior to the merger, just as MCI had to sell its business prior to merging with WorldCom," Jacobs said.

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