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Verizon’s takeover of MCI: Wall Street wins, Main Street loses

Verizon takeover of MCI another in wave of mergers hurting consumers’ pocketbooks
Monday, Feb. 14, 2005
Contact: Mark Cooper, CFA, 301-807-1623
Janee Briesemeister, CU, 512-477-4431, x. 117
(Washington, D.C.) — News that telecommunications giant Verizon won the bidding war for MCI – one of the last major long distance companies in the United States – tops a wave of recent mergers that are bad news for consumers, Consumers Union and the Consumer Federation of America said today.
“These mergers might satisfy Wall Street, but they will hurt Main Street,” said Janee Briesemeister, senior policy analyst at Consumers Union, publisher of Consumer Reports.
Last month, SBC announced a deal to acquire AT&T. Long-distance and wireless provider Sprint Corp. announced late last year its intent to buy Nextel Communications Inc., just weeks after regulators approved Cingular’s take over of AT&T Wireless. Qwest had also been in negotiations with MCI.
“The Telecommunications Act of 1996 has failed to deliver the vigorous competition to residential consumers that Congress promised. Competitive options for residential and small business customers are shrinking, even as state and federal regulators move toward further telecommunications deregulation,” said Mark Cooper, director of research for Consumer Federation of America. “That’s a costly combination for consumers.”
Industry claims that new technologies give consumers choices beyond traditional landline phones are little but smoke and mirrors. Wireless remains more expensive than landline service for low-volume phone-service users. Internet-based service requires a high-speed Internet connection that adds $20 to $45 a month to a consumer’s phone or cable bill, and another $30 per month for Internet-based phone service. This high price service is not an option for the roughly 70 percent of households that don’t have high-speed Internet.
“Consumers will have to spend more on high-end packages in order to have any type of choice in the future,” said Briesemeister said. “Worse, the so-called options to traditional phone service, such as wireless and broadband, are controlled by the same companies. For example, SBC and Verizon are owners of the two largest wireless companies, Cingular and Verizon Wireless, as well as major providers of broadband.”
Added Cooper: “As a result of these mergers and the push to deregulate markets with feeble competition, it will be harder and more expensive for budget conscious households to get basic local and long distance service.”