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 Will antitrust regulators look to telecom law to define the market, even though everyone agrees it is outdated and doesn’t reflect the market?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?”
Competition is heating up in the telecom industry, and not just for customers. Verizon’s bid for MCI–once thought a done deal — is being aggressively challenged by Qwest. After MCI’s board accepted Verizon’s $6.7 billion bid on Valentine’s Day, Qwest sweetened its own bid, offering some $8 billion. MCI’s board met this week to consider the offer, with a decision expected next week. This intra-Bell food fight should put paid to any notion that Bells are too monolithic to ever challenge one another. And it’s a good thing for investors–not least those with MCI stock.
The problem is that both sides are now making this a political issue. Qwest struck first and hardest, with high-profile statements by CEO Dick Notebaert that a Verizon-MCI merger would dangerously increase concentration and threaten competition in telecom. A media and lobbying campaign has followed–urging regulators to scrutinize the deal. Verizon has been much more restrained, although it too has played the political card, arguing that–because Quest owns an Internet backbone already–its deal could decrease competition.
Continue reading →
No one ever said there wouldn’t be losers from the planned MCI-Verizon merger. Among the most hard-hit, apparently, will be lawyers. The Legal Times reported recently that the merged firm is expected to “slash” its legal team, which includes 357 in-house attorneys, plus countless others in outside firms. The carnage might not stop there, as the Times quotes one lawyer saying: “Every firm that has a telecom practice is going to get squeezed.”
One problem is that, in addition to the normal sort of legal work any firm has, telecom companies have long devoted enormous resources litigating and lobbying against each other. MCI has been especially lawyer-dependent, with much of its business plan since 1996 dependent upon regulatory largesse. With this year’s mergers, that industry civil war may be be over, or at least be less intense. That’s good news for consumers–as the industry may actually be able to focus on serving customers rather than legal papers.
The heart breaks, however, for the JD’s that might be left behind. Perhaps an EsquireAid concert could be organized…
There’s been a lot of hand-wringing going on in the media and in Washington this week over the announced mergers of SBC-AT&T and Verizon-MCI. The Chicken Little crowd is out in force with their claims that the sky is going to fall on consumers should these mergers go forward.
The problem here is that too many people are still thinking about telecommunications in 1980s terms. We still talk about “local” versus “long-distance” providers as if they are distinct sectors. This is just silly. We have been witnessing the rapid death of what we used to call the long-distance sector. The rise of the wireless industry long ago decimated the long-term viability of long-distance sector. Consumers have always desired simple, flat-rate pricing for all their communications services and that’s what wireless gives them. With everyone now thinking in terms of buckets of minutes, it was only a matter of time before long distance was shown the door by most customers.
Continue reading →
The timing was eerily reminiscent of the SBC-AT&T merger announcement two weeks ago. A weekend of speculation and negotiation, followed by an early morning announcement of the merger. This time, the happy couple was Verizon and MCI, with MCI being purchased for $6.7 billion. Its still early to gauge the reaction, but so far the news has been met with a loud yawn. The stock markets barely moved, and the political reaction has so far been muted. That’s for good reason–although the merger looks to be a good one for consumers, as well as the firms involved, it really just confirms changes long underway in telecom, rather than setting any radically new direction.
Continue reading →
It’s official. After a week or so of speculation, SBC Communications announced that it is buying AT&T. The deal that Clinton FCC Chairman Reed Hundt once called “unthinkable” is now–pending regulatory approval–a reality.
The acquisition is a bit of a family reunion–SBC is, after all, one of the “baby bells” spun off by AT&T twenty years ago. A “Mother and Child” reunion, according to a Philadelphia Inquirer story last week. But does the deal signal a return to the old days of Ma Bell? Is the old Bell system family being revived?
Continue reading →
Excellent piece by Alorie Gilbert of CNET News.com today on the Oracle-PeopleSoft decision. Begins as follows…
“The U.S. Justice Department’s dramatic defeat in the Oracle antitrust trial underscores the unique character of software: It’s a fast-paced, dynamic industry that makes a lousy target for trustbusters.”
Amen to that.
Oracle! Chalk one up for Oracle in its battle against its former allies at the Antitrust Division. Yesterday, a federal court threw out DOJ’s (somewhat screwy) challenge to Oracle’s takeover bid for PeopleSoft. Using some market share ledgermain, DOJ maintained that the merged firm would dominate some specific, narrow, carefully defined, somewhat imaginary sub-sub-markets of the business software market. Never mind that it’s quite a crowded field, with major competitors such as SAP, countless minor players, a looming giant (Microsoft of course), and changing technology that would undermine any dominance anyway. Despite the win, the issue isn’t settled yet, as DOJ may still appeal, and an investigation is still ongoing in Europe (remember SAP?). Of course, if Oracle needs any advice on how to proceed, there probably are a few folks at Microsoft who can share their experiences.
Reuters is reporting that the European Commission is launching an antitrust investigation into a plan by Microsoft Corp. and Time Warner Inc. to acquire joint control of U.S. ContentGuard Holdings, a firm that makes digital rights management (DRM) technologies to help protect copyrighted files from unauthorized use.
This is foolish. Most IP providers today are struggling to win a technological arms race against users who are hell-bent on devising ways around most forms of content protection. My own view of this technological arms race is that it is a good thing overall and that government shouldn’t enter the debate and try to tilt the balance one way or the other. Generally, therefore, I oppose new laws like the DMCA and the Induce Act, but I also oppose laws cutting the other way, like proposals to expand compulsory licensing. When I see an announcement that government is taking steps to limit collaborative efforts by industry to create new DRM techniques or products, I view it as an unnecessary government barrier to the marketplace’s ability to protect intellectual property. (See this intro to the “Copy Fights” book I co-edited with Wayne Crews for additional details).
To elaborate, if two or more content providers want to get together and try to devise new DRM systems to protect their content, power to them. They should have every right and freedom to do so without being subject to government interference (including antitrust which hunts like this latest EU case). On the other hand, if someone out there circumvents their new DRM scheme the day after it hits the market, those companies should not come running to government seeking redress. Let the technological arms race continue I say! I’ll be expanding upon this theme in an upcoming blog entitled Is DRM the Devil?
That’s the tally for commissioners on the Antitrust Modernization Commission (AMC). With a vague charter to “examine whether the need exists to modernize the antitrust laws and to identify and study related issues,” the AMC has been tasked with preparing a report for Congress and the president. The twelve commissioners are appointed by the president and Congress for purposes of political balance and the report is to be delivered within three years of the first meeting, which was last month. Deborah Garza has been appointed chair of the commission.
One potential area of interest is the impact of technology on markets and antitrust policy. Network industries and technological change may generate calls for new definitions of markets and competition, particularly in the wake of the Microsoft case and current debate over the merger between Oracle and PeopleSoft. Economists have long been wary of antitrust laws, identifying potential harmful effects that such policies can have in the marketplace. Efficient practices and mergers have been disallowed in the past on antitrust grounds, and in many instances these cases are filed by competitors who are threatened rather than consumers who are harmed. Let’s hope these lessons are not lost in the current debate over modernization.
Recently, the AMC issued a request for public comment, asking interested parties to identify areas that the commission should include in its review. Comments are due September 30.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.