As it attempts to consummate its record-setting takeover of Sprint, MCI WorldCom will face tough scrutiny from federal regulators, especially on the question of what the combination portends for long distance prices.
But legal experts say getting clearance from the Feds will be easier if regulators take into account the potential competitive threat of regional phone companies who want to enter the long distance business.
The Baby Bells, which dominate the market for local phone service, have been itching to do long distance.
But the big local phone carriers need approval from FCC to offer those services, and so far the agency has consistently turned down their applications.
That could change, however.
"The interesting question will be what weight the regulators give to the potential competition in long distance that is represented by the incumbent local exchange carriers," said John Ross, who chairs the communications committee of the American Bar Association's Antitrust Section.
If one of the big local phone companies like Bell Atlantic or SBC gets into long distance, MCI WorldCom and AT&T will no longer be the only heavyweights in the business.
To carry out its planned acquisition of Sprint for a record US$129 billion, MCI Worldcom will need to get approval from a bevy of regulatory agencies, including the Department of Justice, Federal Communications Commission, and the Federal Trade Commission.
Legal experts say its likely regulators will force the companies to divest some of their assets in the name of competition. After all, that's what happened when WorldCom wanted to buy MCI, and the two companies had to sell off a bunch of Internet-related assets.
WorldCom will face the toughest test from the Federal Communications Commission, which has a higher standard of approval than other agencies. To get the green light from the FCC, MCI WorldCom will have to prove that its planned acquisition will actually spur competition and benefit US consumers.
FCC chairman William Kennard said he plans to take a long, hard look at the company's plans before giving his consent to the deal.
MCI Worldcom CEO Bernard J. Ebbers said he expects nothing less from the FCC chairman.
"We understood from Day 1 it's our burden of proof to show that this is pro-competitive, " he said.
