Hearing of Judiciary Committee - Proposed Telecom Mergers

Hearing of Judiciary Committee - Proposed Telecom Mergers

Mr. Chairman, thank you for holding this hearing to examine the mergers between ATT/SBC and Verizon/MCI. These deals have received an unusual reception in the press and within the industry -- an unusually friendly reception and one that I'm not sure is wholly deserved. In fact, one might normally expect that mergers worth $23 billion, combining four of the country's leading phone companies, would raise great concern among those who follow the industry.

But, recent changes in the telecommunications industry have given an air of inevitability to these deals. Market pressures and regulatory changes have significantly limited the options of the long-distance carriers, so that ATT has already announced that it is exiting the market for residential service -- and MCI appears headed in the same direction. Under these circumstances, it is not surprising that many have done a quick analysis and concluded that these deals do not pose any significant antitrust concerns. However, a quick analysis, whatever the outcome, is not enough. And in fact, I think that certainly there are some antitrust issues that require more thorough examination.

Perhaps the most obvious area of concern is the so-called "enterprise market" -- the sector of the market comprised of large businesses with sophisticated telecommunications needs. In this market sector, all four of the merging parties currently compete and so competition there will be affected by these deals. There are also questions regarding the impact of these deals on the markets for long-haul capacity, and in the market for Internet backbone. These are all areas that we will explore today. Even beyond these specific market evaluations, however, is the larger competition issue. Certainly these mergers represent a loss of competition among the phone companies, but the remaining players will tell us that competition is flourishing via different platforms --specifically, that we will have cable companies, wireless companies, and companies that provide "Voice Over IP" services. In other words, so-called "inter-modal" competition will protect competition in these markets.

This, I believe, is the key issue -- the broader competition issue that this Committee must examine most thoroughly and must consider as the most obvious candidate for Committee action. For one thing, we must keep in mind that inter-modal competition, by definition, does not always provide the type of direct competition we are used to seeing. Wireline, wireless, cable -- these services are inherently different, much like trains, planes, and automobiles -- all of which provide a similar service, but in different ways, with different pluses and minuses. Not all will always provide sufficient competitive benefits for all consumers.

Further, in this context, we must discuss whether or not conditions are required in order to ensure that multiple modes of competition are, in fact, available. For example, Voice Over IP is a very promising product, but is not in and of itself a separate facilities-based form of competition. Instead, it is a type of service that is only available to the consumer if he or she has broadband access, and currently that access is only available from the phone company or the cable company. In order for Voice Over IP to be a legitimate competitor to the merged companies, must we require the phone companies to sell DSL separately? These are important questions, and we must begin asking them today.

On a final note, Mr. Chairman, as you know, only the four merging companies are represented here today. While we anticipate that this hearing will provide the Committee with a good base of knowledge regarding the deals, we all agree that we cannot responsibly conclude our examination without hearing directly from those who are critical of these deals. Accordingly, with the consent of the Full Committee, on April 19th, Senator Kohl and I are going to hold a follow-up hearing in the Antitrust Subcommittee, with a panel of non-company witnesses who have concerns about these mergers. That hearing, which will be essentially Part II of today's hearing, will help us to more fully examine these mergers and explore the competitive impacts. Thank you.

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