Mergers May Vex Regulators

As federal regulators weigh what, if any, conditions to impose on two mammoth phone company mergers, they face a vexing Rubik's cube of possibilities. Any requirements they attach to SBC Communications' acquisition of AT&T and Verizon's purchase of MCI could force some customers to do business with a telecom company they didn't choose. The Justice Department is largely focused on the effects of the megadeals on corporate customers, say people with direct knowledge of the situation. In exchange for the deals' approval, they say, Justice is considering forcing the combined company to shed up to several thousand lines that serve big business. The rub: Most corporate customers are under contract and will likely balk at switching providers. The FCC could impose conditions aimed at preserving consumer choice. Until recently, AT&T and MCI each have competed head-on with SBC and Verizon for consumers' home-phone service. Regulators are less concerned about that segment because the long-distance companies stopped marketing residential service after adverse regulatory rulings last year. Still, to promote competition, the FCC could require SBC and Verizon to offer consumers DSL broadband service without also requiring them to use the Bells' local voice service. That would allow consumers to replace the Bells' voice service with an Internet-based phone service, such as Vonage, that could travel over the DSL line. Both Justice and the Federal Communications Commission could approve both deals by next month, though Justice is further along in its review than the FCC.
[SOURCE: USAToday, AUTHOR: Paul Davidson]