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DOJ probing WorldCom, MCI

Regulators continue to investigate the proposed WorldCom-MCI merger, issuing subpoenas in an attempt to measure traffic on the companies' networks.

As part of its ongoing investigation, the Justice Department is gathering information relating to WorldCom's $37 billion bid for MCI Communications, competitors and industry sources said.

Sprint and GTE both said today that they received detailed civil subpoenas that attempt to measure traffic on their high-capacity Internet networks during the first week of March.

"They asked us to take measurements sent to and received from different Internet backbone providers," said David Eisenberg, vice president of law at Sprint. "The notion is to get measures of total traffic flow."

MCI said in a statement that, despite the investigation, it expects the deal to go through by the middle of the year.

The information likely will be used to evaluate claims made by Sprint and other competitors that the proposed merger would result in WorldCom WorldCom heads for dominance carrying more than half the traffic on the Internet. They warn that the concentration will allow WorldCom to raise rates dramatically and deny small Internet service providers access to the high-capacity link to the Net, known as its backbone.

"We think there's very serious concern about potential dominance of the Internet backbone market," Eisenberg said. With the merger, "you're taking what is a successful and well-evolving network of networks and moving toward a network of one."

WorldCom executives were not immediately available for comment. But in past statements, the company's executives have taken issue with claims that the merger would harm competition on the Net. "It is hard for us to imagine anybody controlling the Internet," WorldCom chief operating officer John Sidgmore told CNET's NEWS.COM last month, adding that the that the information investigators are gathering will bear out his assertion. "Those facts would support that this merger is procompetitive, not anticompetitive. At the end of the day, we will pass through."

In addition to scrutiny from the Justice Department, the European Commission and the Federal Communications Commission are also looking into the merger. On Friday, the Consumer Project on Technology--which is aligned with consumer advocate Ralph Nader--is holding a conference on the matter.

Besides backbone providers, the Justice Department also appears interested in talking to other types of Internet providers. IBM--which operates IBM Global Network--said it also received a civil subpoena in relation to the investigation. PSINet received a request as well, said a person familiar with the matter.

Investigators also are concerned that the proposed merger might freeze some Internet companies out of the market. ISPs and backbone providers rely on agreements with one another to exchange data that run across their networks. Last year, WorldCom announced that it was eliminating so-called "peering agreements" with many smaller ISPs. Critics charge that WorldCom's increased market share after the merger would let it lock out still more companies.

"It's going to make it harder and harder for small ISPs to survive," said James Love, director of the Consumer Project on Technology. "We think the Internet has done pretty well not being dominated by anybody. To permit this merger is a recipe for bad things to happen."