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NY's PSC Raises Questions About Verizon-MCI Merger

New York State's Public Service Commission has expressed concern that Verizon Communication's proposed takeover of MCI could produce significant consolidation in large and medium business markets.

In a white paper issued this week, the PSC termed the consolidation "troubling" and offered some tentative remedies aimed at ensuring that smaller telecom providers could "continue to provide their services to medium and large customers, thereby preserving customer choice."

Verizon is proceeding with plans to acquire MCI after a long battle with Qwest, which eventually dropped out of the bidding for MCI.

In its analysis of the pending acquisition, the PSC noted that it also reviewed the acquisition of AT&T by SBC Communications. The PSC expressed few reservations about that transaction, however, because SBC has little presence in New York State and, therefore, its acquisition of AT&T would likely have little impact on business and residential users in the state. Verizon is the major telecommunications carrier in New York State.

Even so, in its report, the PSC cited comments made by some petitioners that "the combined post-merger scenario could provide a powerful incentive for SBC and Verizon to engage in 'tacit collusion' by not competing in each other's territories" In the wake of the breakup of AT&T two decades ago and the subsequent consolidation of the nation's telephone systems, consumer groups have complained that major telephone companies including Verizon and SBC have been re-monopolizing telecommunications.

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