Teletruth Sends Letter to Judge Sullivan Regarding the Bell-AT&T-MCI Merger Review.

The Bell Mergers Harmed Broadband Deployment, Competition and the Economy. The AT&T and MCI Deals Added New Harms to the Public Interest - New Neutrality Concerns

The Letter as a PDF File:


On Wednesday, July 12th, The Honorable Emmett Sullivan, United States District Judge held a hearing to examine if the AT&T and MCI mergers were in the public interest and is holding a meeting on July 25th to announce whether the court intends to proceed with further investigations.

Verizon's Deputy General Counsel, John Thorne, made representations during the July 12, 2006 hearing that the absence of consumer groups reflected satisfaction with the acquisition of MCI by Verizon. Teletruth finds no such satisfaction and asserts a more authoritative standing regarding customer views than Mr. Thorne.

Discussion: How the Mergers Harmed the Public Interest.

The Bell Mergers:

* SBC-Southwestern Bell-Pacific Telesis-SNET -Ameritech-AT&T

* Verizon-Bell Atlantic-NYNEX-GTE-MCI

Teletruth filed a complaint in 2005 with the Federal Trade Commission (FTC) pertaining to the harms to competition and fiber optic deployments caused by the previous SBC and Verizon mergers.

The Complaint includes an in-depth analysis of the mergers: This mini-report is outlines the failures of the SBC mergers.

Essentially, during every merger, the Bell companies made promises to compete, provide broadband and other commitments. Unfortunately, as soon as the ink was dry, the newly merged company closed down fiber optic deployments and never competed.

Fiber Optic Fiasco

Here is a summary of the SBC and Verizon mergers and their harm to fiber-optic deployments.

During the early 1990's, the phone companies made commitments, by state, to rewire America. For example, Pacific Bell was supposed to spend $16 billion and rewire 5.5 million households by 2000 and Ameritech was supposed to spend $6 billion to fund over 6 million homes by 2000. However, as chart demonstrates, after EVERY merger, SBC closed down the existing fiber optic deployments, including all of the work in California, Connecticut, and Ameritech's five states.

Verizon (Bell Atlantic) did the same thing. The company promised to spend $11 billion and rewire 8.75 million households by 2000, but after the Bell Atlantic-NYNEX merger, every state halted their state fiber optic plans -- from Massachusetts to New Jersey, Rhode Island and Pennsylvania

This was 45 mbps, bi-directional, 500 channel, fiber to the home services, that were supposed to be open to competition and ubiquitously deployed.

Combined, Verizon and SBC were to spend $48.9 billion and have 36.5 million households by 2000. --- And there is nothing to show for it. 26 states were impacted by two companies' bad decisions.

Instead, America is 16th in broadband because these companies didn't deliver, yet convinced regulators they would rewire America, during each merger. In fact, overall, the Bells should have had 86 million homes already wired as customers paid over $200 billion for networks they never received.

This lack of serious, globally competitive broadband has harmed our entire economy, costing America $5 billion in new economic growth. Also, the failure of the Bells to bring in cable competition as promised has cost American consumers $8.2 billion annually in higher cable rates -- rates that should have been reduced by competition a decade ago.

Failure to Compete

SBC and Verizon both promised to compete with each other as a condition of the SBC-Ameritech and Verizon-GTE mergers. By 2003, 54 cities outside of their own regions should have had a Bell competitor with wireline competition.

Here's a list of the cities SBC claimed it was going to enter with 'facilities-based' wireline competition, as well as using wholesale services.

And talk about hype, SBC testimony claimed: "Within the next 10 years, the 30 out-of-region markets will have 30 million households and 10 million small businesses."

The FCC wrote about that the Verizon merger, "... will finally enable one of the Bell companies to attack the local markets of the other bells on a widespread and effective basis."

Verizon's promised competition as well in their press announcements: "The merger promises what few other telecommunications providers have been able to offer: A broad-scale attack on the local markets of the other RBOC across the country."

And the FCC, pertaining to the SBC-Ameritech merger claimed competition was coming: "This will ensure that residential consumers and business customers outside of SBC/Ameritech's territory benefit from facilities-based competitive service by a major incumbent LEC. This condition effectively requires SBC and Ameritech to redeem their promise that their merger will form the basis for a new, powerful, truly nationwide multi-purpose competitive telecommunications carrier."

Teletruth, in 2002, wrote the FCC and Congress to investigate how these companies had gamed the regulatory system and that their actions were NOT in the Public Interest, as there was no 'robust' competition in any of these cities by a Bell company.

None of this competitive bravura was real. Instead it was a mockery of the merger conditions. -- SBC claimed that it had legally complied with the FCC merger conditions with "at least 3 customers per city" -- and the FCC agreed.

Killing Off AT&T and MCI by Regulation, Not Competition:

The Bell companies were able to obtain changes to regulations by the FCC to get rid of competitive wholesale rates (the same rates the Bell companies wanted to use to compete with). This put AT&T and MCI out of business for local service -- and made them prime targets to be bought.

Net Neutrality and other harms -- Increasing the strength of the Bell companies by the virtual integration of products -- local, long distance, broadband, wireless, Internet access, and even the national backbones of AT&T and MCI ensured that these companies would command more control, not competition. -- By controlling the access to the Internet and broadband they now can adversely control customer choice -- Net Harm.

Why are you not outraged? ---Why are the AT&T and MCI mergers being given a green light when the basic premise of the previous mergers was flawed or even deceptive and harmed America -- Who's minding the store?

Go to the Comments page we've set up to add you own statement, which will be given to the judge:

Bruce Kushnick, Chairman, [email protected] 718.238.7191

Tom Allibone, Director of Audits [email protected] 609.397.2257

Daniel Berninger, Director, [email protected] 202.250.3838