U.S. PIRG Consumer Blog: DOJ Rubber-stamps Bell Mergers

The Department of Justice has rubber-stamped the anti-competitive mergers of the Baby Bell SBC with AT&T and the Baby Bell Verizon with MCI. PIRG, Consumers Union and Consumer Federation of America filed peitions to deny in both SBC/AT&T and Verizon/MCI. The mergers must still be approved by the FCC. More below.

Here's the FCC's SBC merger page and its Verizon merger page. Here's an excerpt from our SBC petition to deny:

FAILURE TO PROMOTE THE PUBLIC INTEREST
The Commission simply cannot look back on the carnage of the past six years and conclude that its decision to allow a handful of incumbents to dominate the local telecommunications market has served the public interest. Not only have we suffered through a wave of bankruptcies and scandals that destroyed billions, if not trillions of dollars of equity, but the piecemeal approval of mergers and the failure to enforce market opening and network access policies enacted by Congress has allowed the industry structure to devolve into what
Business Week called a “cozy duopoly.�? This “cozy duopoly�? has failed to serve the most fundamental public interest objective of the Communications Act. The “cozy duopoly�? fostered by the Commission’s policies has failed to provide ubiquitous advanced telecommunications services at affordable prices.

Along with CFA and CU, in June we also published the report BROKEN PROMISES AND STRANGLED COMPETITION on the failed promises of the Bells. Excerpt:

THE ANTICOMPETITIVE IMPACT OF THE TELECOM MEGA-MERGERS The wave of proposed mergers in the telecommunications industry — SBC attempting to gobble up AT&T, and Verizon trying to swallow MCI — mark the ultimate demise of any hope for consumers getting more choices and lower prices for local, long distance, wireless, and the new Internet-based services exploding on the market. Evidence submitted to regulators across the country proves the pending mega-mergers of telephone giants SBC/AT&T, and Verizon/MCI will have a devastating impact on the nation’s residential customers.
Taken together, the merger protests submitted by consumer groups show beyond a shadow of a doubt that the mergers are anticompetitive and will impose substantial harm on consumers. The harm posed by these mergers goes well beyond local and long distance markets that are already highly concentrated. More importantly, the mergers will destroy the feeble competition in markets for the telecommunications facilities that are necessary to provide a wide range of telecommunications services, including access to the Internet.

These mergers would create super-Regional Bell Operating Companies (RBOCs) that monopolize the in-region public switched telephone network and “mega-Peer Internet backbone�? providers that dominate access to the Internet for end-users. After a decade of market opening, the two firms being acquired account for about three quarters of the competitive presence in telephone markets. The four companies in question comprise the number one, two or three largest providers of local and long distance service, network access, switching and transport services.

The remaining competitors in the telecommunications business would be minuscule in comparison, lacking the size and geographic reach to provide a competitive check on the two dominant firms. Illogical promises of greater concentration bringing greater competition should be flatly rejected by regulators. The track record of the RBOCs since the passage of the Telecommunications Act of 1996 shows a persistent pattern of bad acts, broken promises and the failure to compete. Intermodal competitors—such as Voice over Internet Protocol and wireless—have all been recently been examined and correctly dismissed as substitutes for retail services by both the Federal Communications Commission (FCC) and the Department of Justice (DOJ).

That RBOCs’ dismal competitive track record, combined with the dearth of competitive alternatives and the dramatic increase in market power that the megacompanies would possess post-merger, demand the conclusion that anti-competitive and anticonsumer behavior would sharply increase post-merger.