Tuesday, March 1, 2005

Telecom Execs Testify in Favor of Big Mergers

In testimony before the U.S. House Committee on Energy and Commerce, the chief executives of AT&T, MCI, Nextel, SBC, Sprint and Verizon each said the mega-mergers currently planned their firms would be good for the industry and good for the national economy.

The committee's chairman, U.S. Rep. Joe Barton (R-TX), pretty much consented, noting that "with an industry that has changed so much in ten years, it should come as little surprise that companies are looking at one another to determine whether partnerships will enable them to be stronger competitors in the new digital world. The combination of Sprint and Nextel will create a broadband giant in the wireless industry that has no affiliation with the Bells. We should not be wary of such a combined entity; we should welcome it. And the once "unthinkable" merger of AT&T and SBC is now very realistic.... The United States needs to have a vibrant communications industry with strong national players. "

Congressman Fred Upton (R-MI), echoed similar thoughts: "These companies will be better positioned -- combined rather than separate -- to do battle in a world where the meaningful fight will be amongst inter-modal competitors -- as they aggressively seek to win the hand of residential, business, and governmental consumers in the offering of a suite of IP-enabled voice, data, and video services. Given the dramatic changes in the communications marketplace over the last 10 years, these mergers are not only logical, but they are integral to ensuring a vibrant and inter-modally competitive communications marketplace. I consider these mergers a necessary tune-up for the telecommunications industry, ensuring that the country's economic engine is geared up to compete globally."

Several lawmakers questions whether the mega-mergers would lead to less competition and higher consumer prices. The industry execs argued that inter-modal competition is growing stronger.

Invited witnesses included Edward E. Whitacre Jr., Chairman and CEO of SBC Communications; David Dorman, Chairman and CEO of AT&T; Ivan G. Seidenberg, Chairman and CEO of Verizon; Michael D. Capellas, President and CEO of MCI; Gary Forsee, Chairman & CEO of Sprint; Timothy Donahue, President and CEO of Nextel Communications; Dr. Mark Cooper, Director of Research at the Consumer Federation of America; Jeffrey Halpern, Senior Equity Research Analyst at Sanford C. Bernstein & Co.; Jim Speta, Associate Professor at Northwestern University School of Law; and Phil Weiser, Associate Professor of Law and Telecommunications at the University of Colorado School of Law.

  • Last month, senior executives from Alcatel, Lucent, Motorola, Siemens and QUALCOMM testified before the House Energy and Commerce Committee's Subcommittee on Telecommunications and the Internet on "How IP-Enabled Services are Changing the Face of Communications." A common theme of the testimony was that Congress should legislate a "light regulatory touch" when addressing IP-enabled services. The witnesses addressed the digital television (DTV) transition and advocated a "hard deadline" for the transition in order to reclaim the analog broadcast spectrum. They urged Congress to make this spectrum available as soon as possible to stimulate the economy.

  • The U.S. House Energy and Commerce Subcommittee on Telecommunications and the Internet is expected to hold four hearings this Spring on updating The Telecommunications Act of 1996. A new bill on telecom regulation is expected to be introduced following the four hearings by key committee members and it could be brought to the House floor for a vote by summer.


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