Critics blast GTE-Bell Atlantic merger

Opposition to the proposed merger between the telco giants mounts as competitors and consumer groups weigh in on the deal for the first time.

John Borland Staff Writer, CNET News.com
John Borland
covers the intersection of digital entertainment and broadband.
John Borland
4 min read
Opposition to the proposed merger between telecommunications giants Bell Atlantic and GTE mounted today, as competitors and consumer groups weighed in on the deal for the first time at the Federal Communications Commission.

At stake is the $53 billion merger deal struck by Bell Atlantic and GTE last July, which must be approved by regulators at the FCC and the U.S. Justice Department. Opponents want FCC and Justice Department officials to block the pending deal, saying that it would sharply reduce competition in local phone markets.

Bell Atlantic and GTE executives say the merger, which would consolidate phone services in their regions, would improve competition in the national phone market as a whole. Joining forces, the companies say, would give the merged unit resources to expand into voice and data services elsewhere in the country.

But critics of the merger, including long distance companies, alternative local providers, and consumer groups, filed a first round of official comments with the FCC today arguing otherwise.

"It would be anti-competitive to let them join forces," said Peter Lucht, a spokesman for MCI WorldCom. "If Bell Atlantic and GTE were really interested in jump-starting competition, they would open their local markets to competition."

New Names, Old Monopolies?
The critics focused on several aspects of the merger, and questioned claims that the deal would lower prices for consumers and increase competition in local phone markets.

GTE once had plans to expand its local service offerings into Bell Atlantic's northeastern territory, they noted. The two companies' merger will eliminate this road to competition, they say.

Critics also pointed to the pending merger between SBC and Ameritech, saying that the combined mergers would concentrate telecommunications power in too few hands, making it virtually impossible for other companies to compete directly.

"Those megamergers would result in two companies owning and controlling two-thirds of all of the local telephone access lines in the country, resulting a Bell East and a Bell West monopoly," said John Hoffman, Sprint senior vice president, in statement accompanying his company's comments.

Finally, GTE is allowed to provide long distance and data services in its home markets, while Bell Atlantic is not, critics said. The two companies have asked for a waiver from some provisions of the 1996 Telecommunications Act, allowing existing GTE customers to keep those services after the merger.

If that waiver is granted, it would allow Bell Atlantic a back door into long distance services, long distance company executives said. If denied, it would reduce competition by pulling GTE out of many markets.

Consumer groups joined in filing to block the merger, saying it could lead to higher phone costs, and fewer services for the new company's customers.

"We're very concerned about the loss of competition," said Mark Cooper, director of research with the Consumer Federation of America.

"They're acting like nobody ever dreamed the baby Bells would compete against other baby Bells," Cooper added. "That's not our notion of what would have happened."

A few groups did weigh in supporting the two companies' merger, however.

The Communications Workers of America, which represents telephone company employees, said the merged companies would better serve residential customers, and would serve its employees' interests well.

"Bell Atlantic and GTE recognize that having a stable, high-quality workforce is a key contributor to success and to providing quality customer service," the union said in its statement to the FCC.

Regulators Already Skeptical
The FCC has approved other recent telecommunications mergers, such as MCI-WorldCom or Bell Atlantic and Nynex, though not without imposing conditions designed to minimize the concentration of power.

But recent signs from regulators indicate that they may not be as ready to approve another round of telecommunications megamergers.

In a speech to state utility regulators early this month, FCC Commissioner Gloria Tristani said she was skeptical of the pending baby Bell mergers.

"In all candor, I'm a little skeptical of the notion that a $25 billion company needs to get bigger before it can compete successfully out-of-region," she said, focusing on SBC's statements in support of its merger.

Meanwhile, chief DOJ antitrust official Joel Klein said last week that several recent decisions would provide clues to how his office might treat the two baby Bell mergers. He cited the ruling forcing MCI to sell off its Internet assets in order to merge with WorldCom, along with one that blocked the sale of Rupert Murdoch's News Corporation satellite assets to a group of cable companies.

"[Those decisions] give you clues to the kinds of problems we're looking at, the kinds of things that we're likely to do in the future," Klein said in a speech at the Brookings Institute last week.

A second round of comments on the Bell Atlantic-GTE merger is due to the FCC by December 23.