FCC asks for details on Internet business
December 15, 1999
Federal regulators asked MCI WorldCom and Sprint on Wednesday how their proposed merger would affect the market for the extensive and sometimes competing Internet services the two companies provide now.
In a letter, the Federal Communications Commission asked the two companies to amend the merger application they filed last month to include information about the Internet services they provide and how the proposed deal would affect the market.
”A description of the impact of the proposed merger on the Internet market is relevant to our public interest analysis,” wrote the FCC’s general counsel, Christopher Wright.
MCI spokesman Peter Lucht said the company would provide the commission with the needed information.
”We’ve said all along we’re prepared to address the Internet issue,” Lucht said. ”We’re happy to supply the FCC with any additional facts that it desires.”
Both companies have acknowledged the issues raised by their combined ownership of Internet ”backbone” the massive data pipelines that crisscross the nation carrying computer traffic for third parties. Some analysts have predicted the companies would have to shed pieces of their Internet business in order to receive regulatory approval for the deal to go forward.
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In their official filing with the FCC, the companies anticipated that the Internet backbone would be part of the Justice Department’s separate antitrust review.
”MCI WorldCom and Sprint are fully cognizant … that the Internet backbone assets of the two companies will be fully scrutinized by the Department of Justice as part of that agency’s review. The result of that scrutiny will be reported to this commission promptly upon resolution,” the companies wrote in their merger filing.
But in his letter, Wright asserted that the FCC also should look at the market effect of combining the two companies’ Internet backbone businesses as part of its own review.
The FCC has the authority to evaluate mergers between companies to see how they impact or serve the public interest, a mandate which can encompass a number of factors not considered in the review by antitrust officials.
Wright also noted that in reviewing the merger between MCI and WorldCom last year, the FCC determined that it independently had to evaluate the competitive effects on Internet services.
To complete that deal, MCI ultimately had to sell its Internet business to receive approval both from antitrust regulators and the FCC.
MCI and Sprint, the No. 2 and No. 3 long-distance carriers respectively, proposed their $115 billion marriage in October.