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Sprint, MCI WorldCom Merger Would Threaten Internet and Long Distance Competition and Jeopardize Job
The Communications Workers of America today urged the Federal Communications Commission to either block MCI WorldCom's proposed acquisition of Sprint Corp. or to impose stringent conditions to remedy anti-competitive harm to the Internet and long distance markets and protect local phone customers and Sprint employees from threatened service cutbacks. CWA is the major union in the telecommunications industry, representing 630,000 employees overall.
The union stated: "The proposed merger would combine the second and third largest long distance carriers, resulting in a long distance duopoly with the Big Two controlling 80 percent of the market. The merged entity would have the power and incentive to raise prices or degrade service at anti-competitive levels in both the consumer and larger business markets."
Citing a threat to Internet competition, CWA charged: "The proposed merger would also disrupt the dynamic competition that is driving Internet growth, resulting in one dominant Internet backbone carrier whose 50 percent market share would give it the ability to raise the price or degrade quality of interconnection to its dominant backbone."
The earlier divestiture of MCI's Internet business which was imposed by regulators in the merger with WorldCom "failed to achieve its stated goal to create another viable Internet backbone competitor," the union noted.
The merger, absent FCC-imposed safeguards, would also result in large scale job cuts and diminished service quality in both local and long distance markets, according to CWA. The union noted that job reductions after the MCI-WorldCom merger caused a rise in customer complaints over eroding service. The companies have stated that they plan further job cuts, and these, CWA noted, "are likely to be very large to achieve the projected $1.3 billion first-year post-merger savings."
The companies have failed to make a case that there are verifiable public interest benefits from the merger that would counteract the anti-competitive impacts, the filing stated.
The merger application should be denied, CWA stated, unless the companies reach agreement with regulators on major remedies including: Full and complete divestiture of Sprint's integrated long distance and Internet backbone facilities and business; conditions that would protect consumers against decline in telecommunications service resulting from post-merger employment cuts; conditions that would ensure that residential and small business customers receive concrete benefits from the merger in local exchange markets, with a particular focus on closing the digital divide in Sprint's largely rural service areas.
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The union stated: "The proposed merger would combine the second and third largest long distance carriers, resulting in a long distance duopoly with the Big Two controlling 80 percent of the market. The merged entity would have the power and incentive to raise prices or degrade service at anti-competitive levels in both the consumer and larger business markets."
Citing a threat to Internet competition, CWA charged: "The proposed merger would also disrupt the dynamic competition that is driving Internet growth, resulting in one dominant Internet backbone carrier whose 50 percent market share would give it the ability to raise the price or degrade quality of interconnection to its dominant backbone."
The earlier divestiture of MCI's Internet business which was imposed by regulators in the merger with WorldCom "failed to achieve its stated goal to create another viable Internet backbone competitor," the union noted.
The merger, absent FCC-imposed safeguards, would also result in large scale job cuts and diminished service quality in both local and long distance markets, according to CWA. The union noted that job reductions after the MCI-WorldCom merger caused a rise in customer complaints over eroding service. The companies have stated that they plan further job cuts, and these, CWA noted, "are likely to be very large to achieve the projected $1.3 billion first-year post-merger savings."
The companies have failed to make a case that there are verifiable public interest benefits from the merger that would counteract the anti-competitive impacts, the filing stated.
The merger application should be denied, CWA stated, unless the companies reach agreement with regulators on major remedies including: Full and complete divestiture of Sprint's integrated long distance and Internet backbone facilities and business; conditions that would protect consumers against decline in telecommunications service resulting from post-merger employment cuts; conditions that would ensure that residential and small business customers receive concrete benefits from the merger in local exchange markets, with a particular focus on closing the digital divide in Sprint's largely rural service areas.
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