The Telecom Mergers Food Fight – Animal House II

by on March 16, 2005 · 2 comments

Can’t you just picture it, Dick Notebaert, CEO of Qwest, yelling “food fight” in the manner of Bluto Blutarsky (John Belushi) in Animal House. Building upon James’s recent entry about the MCI merger, a new group has entered the food fight between Verizon and Qwest over who should buy MCI. The CLEC carriers – XO Communications, Savvis Communications, Eschelon Telecom, Cbeyond Communications, Covad Communications and Broadwing Communications announced yesterday that they formed a working group to challenge the acquisitions of both MCI and AT&T by legacy Bell companies.

The group consists of antitrust lawyers and economists, so it is clear that they intend to build an antitrust case against these mergers. Here we go, back to the “market definition” question. Will antitrust regulators look to telecom law to define the market, even though everyone agrees it is outdated and doesn’t reflect the market? Will they poll customers and interview people within the industry, and use this as the failed basis for the market definition, as was the case in DOJ’s lawsuit against Oracle?

Qwest started this food fight with their rent seeking behavior, in trying to convince Congress that it is the preferable candidate to acquire MCI (the heck with what the MCI shareholders say!). And as James says in his blog: “firms have (rightly) fought for years to relax the grip regulators have had on the industry. But now they are inviting those regulators to come right back in. Its a strategy they – and their customers – will regret.”

Indeed, we need to break away from the thought of telecom as one big regulatory fraternity, or else telecom companies will continue to yelp “Thank you, sir! May I have another?”

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