Verizon may be asked to sell some MCI units

Possible conditions put in N.Y. regulators' report

July 08, 2005|By BLOOMBERG NEWS

NEW YORK - New York regulators may require Verizon Communications Inc. to sell some MCI Inc. operations in the state and freeze certain prices to blunt "anti-competitive" aspects of the carriers' planned merger.

The possible conditions on the $8.44 billion deal came in a report from staff at the New York Public Service Commission, which seeks public comment on them through Aug. 22. State commissioners will vote at a later date on whether to impose any conditions.

New York regulators want to ensure that the acquisition by Verizon, the largest U.S. telephone company, won't lead to higher phone-service prices for customers or make it harder for other carriers to compete.

In May, state Attorney General Eliot Spitzer urged U.S. regulators to require Verizon to remove restrictions on purchases of certain Internet services.

"The anti-competitive aspect of the merger appears obvious" with regard to wholesale communications services, the commission staff wrote in the report.

Separately, SBC Communications Inc.'s planned $16 billion acquisition of AT&T Corp. doesn't warrant any conditions in New York, the agency said yesterday.

Both planned takeovers require approval from the U.S. Federal Communications Commission and Justice Department as well as some states, including New York. The state is Verizon's largest market and home of the company's headquarters, in Manhattan.

"We are pleased that New York is headed toward joining those states that have already approved the transaction," Verizon said yesterday.

Verizon agreed in February to acquire MCI, the No. 2 U.S. long-distance phone company behind AT&T. SBC, the second-biggest local-phone carrier, agreed in January to buy AT&T.

Spitzer said Verizon should be forced to scrap a requirement that buyers of its fast-Internet service also be local-telephone customers, a condition also proposed by state regulators. Verizon said it plans to sell stand-alone fast-Web access.

The New York staff report said regulators are considering requiring Verizon to freeze prices for three years for smaller carriers who are MCI wholesale clients, a move aimed at maintaining competition for customers of those carriers.

The report's authors - staff attorneys, economists and accountants among them - also asked for comment on whether Verizon should be forced to sell MCI network parts, including fiber-optic cables and equipment that transports calls and data, because competition in those markets may be diminished.

Verizon has received approvals for the MCI purchase from 10 out of about 26 states, Verizon spokesman Brian Blevins said yesterday. SBC has cleared the hurdle in 25 out of 36 states as of June 30.

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