FCC 'Stops the Clock' on MCI/Sprint Merger

FRAMINGHAM (04/28/2000) - The U.S. Federal Communications Commission has told MCI WorldCom Inc. and Sprint Corp. that it can't move forward on their merger application until they present yet more data on long-distance and Internet market shares.

The move - revealed in an previously unpublicized April 19 note placed in the FCC's merger docket - came soon after user consultants told the FCC staff they questioned the two carriers' earlier claims that large business users have numerous options for voice and data services.

Network World has learned that FCC staffers have been calling around to lawyers and vertical-industry trade associations asking for their views on the state of competition for enterprise-network services. In one such meeting, on April 10, two partners in the Washington law firm Levine, Blaszak, Block & Boothby - which specializes in negotiating carrier contracts - met with a bevy of FCC officials to explain how large business users buy network services.

According to a note placed in the merger docket the following day by Ellen Block, one of the partners, "We stated that large business users with complex network requirements currently look overwhelmingly to AT&T, MCI WorldCom and Sprint and at this time do not consider the other carriers to be suitable candidates to meet those requirements."

In March, MCI WorldCom and Sprint had presented the FCC with a chart of 11 carriers that they claim provide all, or almost all, of a bedrock set of seven enterprise services. Those services included frame relay, ATM, Internet access, private lines, outbound voice, advanced toll-free routing, and virtual private networks. The chart included carriers like Williams and Level 3, which are generally considered wholesale carriers, selling mostly to other service providers.

The subsequent April 19 instruction to MCI WorldCom and Sprint stated that they must now "submit additional information on the Internet and long-distance markets and provide certain consultant reports that are relevant to this information." The note said that until this information is in and certified, the FCC is stopping a "180-day clock" that represents a six-month timetable in which FCC Chairman William Kennard originally promised to review the complete merger filing. The clock currently stands frozen at day 75.

An MCI WorldCom spokesman says the statements of the user consultants represent a "difference of opinion" from the merger applicants' filings and that the two companies stand by their earlier claims. So far as is known, the commissioners themselves have not been in the recent meetings. An FCC staff official known to be at the meetings did not return a phone call.

Also Thursday, a study issued by the Economic Policy Institute (EPI) recommended that Sprint should not only spin off its Internet backbone business but also its other long-distance operations - including ATM and frame relay - in order to make the merger palatable to regulators and users. Sprint CEO William Esrey last month said he saw "no reason" to divest anything other than the Sprint Internet backbone because there is no market concentration in the other areas. But the EPI study, provocatively titled MCI WorldCom's Sprint Toward Monopoly, shows that the two carriers together already corral 46.5 percent of frame relay revenues and 62 percent of ATM revenues.

More information about the EPI study is available at: www.epinet.org.

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