Merge with caution

Competition: MCI-Worldcom's purchase of Sprint raises concerns about telecommunications future.

October 13, 1999

CONSOLIDATION rather than competition seems the defining dynamic among the nation's largest telecommunications companies. Last week, SBC Communications received federal approval to purchase Ameritech. Hours earlier,MCI Worldcom announced its $115 billion acquisition of Sprint.

Buying the competition has become a priority in the new era of communications. The reason is simple: The industry is no longer centered around the telephone.

To survive, telecommunications companies must transmit data and video images as well as voice. They also need wireless digital and fiber optic systems, as well as access to millions of households and businesses. Rather than try to build these systems, the companies find it much easier to buy businesses that have already developed these services.

But this may not bode well for customers. "Competition has produced a price war in the long-distance market," Federal Communications Commission Chairman William E. Kennard said this week. "This merger appears to be a surrender. How can this be good for consumers?"

This latest combination of companies may not result in the sort of dominance that AT&T once had over the nation's telecommunications industry, but the wave of mergers raises legitimate concern.

Competition among a few colossal companies is much different than among a dozen smaller ones. For that reason, the FCC put conditions on the SBC-Ameritech merger designed to encourage the company to move into additional local markets.

The telecommunications industry is among the most dynamic segments of the nation's economy, and the FCC must ensure that future mergers don't put a damper on this growth or reduce quality while raising the price of services for the customer.

Pub Date: 10/13/99

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