Copyright 1999 Federal News Service, Inc.
Federal News Service
NOVEMBER 8, 1999, MONDAY
SECTION: IN THE NEWS
LENGTH:
1177 words
HEADLINE: PREPARED TESTIMONY OF
JOHN W.
SIDGMORE
VICE CHAIRMAN
MCI WORLDCOM
BEFORE THE
SENATE COMMITTEE ON COMMERCE, SCIENCE AND TRANSPORTATION
BODY:
Good morning. I appreciate the
opportunity to share with the Committee our vision of how MCI WorldCom and
Sprint together will continue to bring competition and innovative technology to
the changing world of telecommunications. Mr. Ebbers, our President and CEO
would have liked to be here, but had a longstanding commitment in a western
state today.
The question facing us is simple: Can competitive long distance
providers survive to fight against the mega-Bell and cable monopolies on a
nationwide basis? The answer is yes, and our merger is the pathway to meet that
challenge.
Consider the changes of the last two years: 1) dramatic decreases
in the price of traditional long distance service, 2) explosive growth of
wireless telephony that has led to a demand for "all distance" pricing, 3)
consolidation of the seven Bells into two mega-Bells and two other Bells, 4)
imminent entry into the long distance market by the mega-Bells, and 5) growing
demand for broadband capacity from both residential and business customers.
Our conclusion is that the separate market for long distance created by the
divestiture of AT&T, is eroding; that successful competitors like ourselves
need to be able to fulfill all of a customer's needs for wireless and wireline;
and that strong competitors must be able to effectively bring broadband Internet
access and services all the way to a customer's home or business.In other words,
the telecommunications industry of the future requires that a company be able to
provide one-stop shopping for economical packages of services, and to the
maximum extent possible, to reach the customer directly.
The broadband
battle is basically about the last mile -- not about the Internet backbone -
which is already open and competitive with thousands of competitors and several
major players despite what some of our competitors say.
In the world of the
last mile, two titans are emerging. One is an old titan reborn through local
cable facilities - AT&T. The other, ironically, is the offspring of that
company -- the Bell Operating Companies. The new mega-Bells have maintained
their hold over local markets, are already major wireless providers, and have
moved swiftly to leverage those assets towards becoming providers of the full
range of voice and data services. AT&T, meanwhile, has chosen to buy up the
other last-mile -- cable -- and is seeking to dominate the provision of
high-speed Internet access and bundle it with its own wireless, local and long
distance services.
Faced with these trends, MCI WorldCom had a tough choice
to make. We could have left residential customers to the Bells and big cable,
but that would have been bad for those consumers and bad for us. We could have
merged with a Bell in order to gain the advantage of controlling the critical
last mile of copper wire into every home. Or, we could get stronger, and even
more competitive. You now know what choice we made. MCI WorldCom and Sprint
decided to join forces as the single best hope for a strong and effective
alternative to the megaBells and the emerging AT&T cable monopoly.We know
how to do this. Both MCI WorldCom and Sprint were born outside of the Bell
system and share an entrepreneurial spirit that has contributed to rapid growth
and success. Dedicated to opening markets to competition, both our companies
have focused on delivering benefits to customers: lower prices, innovation and
higher quality services.
And we'll be able to do all of this more
efficiently. Over the next five years, the merged company will realize cost
savings of $9.7 billion in operating costs and $5.2 billion in capital
expenditures. These cost savings not only allow the new company to compete
aggressively in both the business and consumer markets, but also will enable us
to aggressively invest in new technologies such as broadband access and next
generation wireless. We'll be serving 44 million customers and growing; we'll
have local network facilities in more than 2500 markets nationwide; we'll have
more than 4 million PCS subscribers and 1.7 million paging and advanced
messaging customers. Hopefully, we'll have all the piece parts we need to be a
strong competitor to AT&T and the mega-Bells.
Our competitors overseas,
spurred by mounting competition on their home turf, are making acquisitions,
joint ventures and aggressive international investments in key markets around
the world - The U.S. included. The combined, complementary strengths of MCI
WorldCom and Sprint will make us uniquely equipped to develop and market the
communication products and services consumers need and want most: data,
Internet, wireless, local, long distance, and international.
Together, we
will have the capital, proven marketing strength and end- to-end,
state-of-the-art networks to compete more effectively against the international
incumbent carriers. Our selfreliant, facilities- based global strategy positions
us well to fully service the rapidly growing global telecom market - a market
valued at $1 trillion by the year 2002. Our new company will have the people and
the technology required to bring innovative services and the benefits of
competition to residential and business consumers across America and around the
world.
Here in the United States, we can already see hints that this
combination will accelerate broadband deployment in competition
with Bell DSL and AT&T cable modems. MCI WorldCom is breaking through in
local markets in New York State, already providing over 160,000 residential
customers there with two things they've never had before: choice and low cost,
flat-rated service. Sprint is going forward with the introduction of its
Integrated On Demand Network (ION) in Kansas City, Seattle, Denver, and
eventually, in local markets across the country. MCI WorldCom will be collocated
in 1500 central offices for DSL by the end of this year and 2000 by next year.
We have both invested heavily in a fixed wireless technology known as MMDS that
will allow us to get to customers who are beyond the reach of DSL, usually in
predominantly rural areas. With these MMDS and DSL assets, combined with the
Sprint ION networks and local facilities; we're in a very strong position to
bring consumers urban and rural - the broadband access that they need and want.
We know that any major merger in our industry will be viewed skeptically at
this point - but it's important to remember that not all mergers are the same.
This is not a merger of monopoly providers - this merger is being done so we can
become large enough in scope to compete with the monopoly powers.Some regulators
have reacted to the news of a MCI WorldCom - Sprint merger by raising a yellow
flag of caution. That's their job. We look forward to demonstrating, and we
will, that this merger is pro-competitive in all markets. That debate will
benefit everybody, because it will help government officials and consumers alike
to understand the best ways to advance the cause of telecommunications
competition in the next century.
Thank You.
END
LOAD-DATE: November 10, 1999
