New Roadblocks Face Verizon-MCI Merger

Before Verizon Communications brings home the MCI bacon, it's becoming apparent that it will have to pass through a rough obstacle course. A group of smaller telecommunications competitors called the Alliance for Competition in Telecommunications (ACTel) filed a petition with the FCC Monday urging the regulatory agency to block Verizon from acquiring MCI.

At the same time, large MCI stockholders, seeking to raise the $8.44 billion price that Verizon has agreed to pay for MCI, are drumming up support for an earlier rival bidder for MCI--Qwest Communications International--to re-ignite the bidding. In addition, the deal hasn't been enhanced by revelations this week that MCI may owe hundreds of millions of dollars in back taxes.

Yet another potential monkey wrench is news that the Justice Department's top antitrust official is stepping down, placing in limbo, at least temporarily, any investigation of the Verizon-MCI combine. R. Hewitt Pate, the DOJ's assistant attorney general for antitrust, won't be on the job to review the proposed merger, nor will he be there to review the proposed acquisition of AT&T by SBC Communications.

In its petition to the FCC, ACTel argues that taken together, the merging of MCI and AT&T into former Baby Bells Verizon and SBC, respectively, will put many independent telecommunications companies at a disadvantage.

ACTel's membership is centered on telecom firms that provide services primarily to business customers. "Our companies are all B-to-B-focused," said Chad Couser of XO Communications, who is serving as a spokesman for ACTel. While MCI and AT&T are strong in consumer long-distance services, it is their dominant offerings to business customers that make them so attractive to Verizon and SBC.