Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
November 04, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2027 words
HEADLINE:
TESTIMONY November 04, 1999 RUSS FEINGOLD SENATOR SENATE
JUDICIARY MCI WORLDCOM AND SPRINT MERGER
BODY:
Statement of Senator Russ Feingold Senate Committee on the Judiciary The MCI
WorldCom/Sprint Merger - A Competition Review November 4, 1999 Mr. Chairman,
first let me thank you and the Ranking Member for convening this important
hearing. I have my own feelings about this proposed mega-merger, but I look
forward to hearing from this panel of experts to see if, in fact, the Sprint/MCI
WorldCom merger would enhance competition in the long-distance telephone market.
I won t mince words, Mr. Chairman, I am disheartened by this proposed merger, to
say the least. Should this merger pass muster with the Federal Communications
Commission and the Justice Department, about 90 percent of the long-distance
telephone market would be controlled by just two companies. According to the
FCC, the next largest companies possess just 2 percent of the market each. I
fail to see a benefit to consumers from combining the second and third largest
long-distance companies in an already concentrated market. Mr. Chairman, many
people will be surprised to learn that, according to Consumers Union, the
Consumer Federation of America, and the Texas Office of Public Utility Counsel,
the majority of residential long distance consumers are actually paying more
today for long distance calling than they did before the passage of the
Telecommunications Act of 1996. What with nickel nights to 5
cents every day to 7 cent one rates, long-distance rates have seemed to fall
precipitously in the recent past - unfortunately, those gains for consumers on
per-minute rates have been more than offset by a host of new charges and fees.
Now, these two behemoths want to consolidate and thereby strangle some of the
competition that has led at least to falling long-distance rates. And again,
consumers inevitably will take it on the chin. Mr. Chairman, this is a step
backward, not progress toward competition. As I have discussed, there also is
evidence that the benefits of competition in the long-distance market are not
all it s cracked up to be. The long-distance companies have more than made up
for falling long-distance rates with monthly minimum usage charges, the
presubscribed interexchange carrier charge, and the universal service fund
charge, which hit low-income, low-volume callers disproportionately. Some of the
witnesses before us today may argue that this proposed merger will increase
competition in the long-distance telephone market, but I am skeptical, given
what has happened so far. Analysis by the organizations I mentioned found that
71 percent of poor households; 64 percent of lower-middle income households; 58
percent of middle income households; 50 percent of upper-middle income
households; and 43 percent of wealthy households now pay more in their long
distance bills than they did before the 1996 Telecom Act. Since the Act passed,
about 70 million households are paying $2.3 billion more per year in their
long-distance bills. One-half to two-thirds of all residential consumers are
paying more expensive telephone bills. This is occurring while 60 percent of the
wealthiest Americans are paying less. If this is the effective competition we
were promised, I won t lose any sleep over my vote against the Telecom Act. Mr.
Chairman, the fact that we re even considering this merger shows, once again,
that the 1996 Telecommunications Act has not led to the vaunted growth in
competition that it promised and has failed to deliver significant benefits to
consumers. In fact, just the opposite has happened. I was one of just five
senators to vote against the Telecom Act. In fact, I strongly opposed the
provisions that supporters contended would lead to greater competition and lower
rates for consumers. Those few of us in the Congress who voted against the
Telecom Act did so because it did not seem likely to lead to true competition
and benefits to consumers. We have been hoping to be proved wrong, but it doesn
t seem to be working out that way. In fact, it is now clear that competition is
dwindling before our eyes, and certainly not growing. Mr. Chairman, I favor
increased competition and deregulation of telecommunications markets because
true competition benefits consumers by providing them with more choices, lower
prices and improved service. The spate of recent mergers, including the proposed
union of Sprint and MCI/WorldCom that we are discussing today, has led and will
continue to lead to fewer choices. I would wager that higher prices and
diminished service will follow hard on the heels of that merger. Over the past
few years, the biggest news in the telecommunications industry has been the
tremendous consolidation of all its facets, from local and long distance phone
service, to cable television to the Internet. The latest merger rage has
highlighted the willingness of companies that traditionally have operated in one
realm to buy their way into other realms, but the only problem with that trend
is that it brings consolidation - the enemy of competition. The most obvious
example is AT&T. Over the past year and a half, AT&T has committed $112
billion to the acquisition of cable television companies. Last year, AT&T
agreed to acquire Tele- Communications, Inc. (TCI) from Time/Warner. TCI was the
nation s second-largest cable company. Earlier this year, AT&T reached an
agreement to acquire MediaOne, the nation s fourth-largest cable company. Aside
from becoming the nation s largest cable company, AT&T also is aligned with
the nation s other two largest cable companies. The AT&T/MediaOne deal
extends AT&T s reach into cable television and continues AT&T s move to
provide consumers with a bundled, full range of telecommunications services. The
merger could allow AT&T to provide competition against Baby Bells in local
phone markets through cable connections. Not to be outdone, the Baby Bells, have
saddled up in a move toward regional monopolies. The 1984 breakup of Ma Bell
spawned seven Baby Bells that could offer local phone service only. The 1996
Telecommunications Act allowed the Baby Bells to provide long-distance service
should they meet conditions that open their local service to competition. There
are now four remaining regional Bell operating companies. They control 98
percent of all local telephone service. I fail to see how a few vast regional
monopolies are any better than a single vast national monopoly. So, the
statistics presented by a recent American Antitrust Institute report are
striking. This study cataloged 4,728 reportable mergers in 1998, compared to
3,087 in 1996, and 1,529 in 1991. The total value of U.S. mergers completed in
1998 was $1.2 trillion in an economy with a gross domestic product of $8.4
trillion. Mergers are the big story in American economic life today, and as the
report shows in stark terms, funding for the agencies on which we rely to police
those mergers has not nearly kept up. Mr. Chairman, we now have four companies
controlling 98 percent of the local telephone market; six companies controlling
more than 80 percent of the cable television market; seven firms controlling
nearly 75 percent of cable channels and programming; and four companies
accounting for nearly a third of the radio industry s annual revenue. The speed
of these mergers can make your head spin just to keep up with the name changes.
But they have real life consequences for consumers. I look forward to hearing
the testimony of the witnesses. And I look forward to their answers to some of
my concerns.
LOAD-DATE: November 5, 1999
