The Antitrust Revolution: Economics, Competition, and Policy

By John E. Kwoka Jr.; Lawrence J. White | Go to book overview

CASE 3
Potential Competition and
Local Telephone Service:
The Bell Atlantic-NYNEX Merger (1997)

Steven R. Brenner


INTRODUCTION

On April 21, 1996, Bell Atlantic Corporation and NYNEX Corporation announced that they had reached an agreement to merge. Nearly sixteen months later, after the Department of Justice (DOJ), the Federal Communications Commission (FCC), and many state public utility commissions had cleared the transaction, the two companies completed their merger, one of the largest in U.S. history. Bell Atlantic was the local telephone company for most customers in six eastern states from Virginia through New Jersey, and NYNEX provided local telephone service for most customers in seven states from New York to Maine. Together, the two companies had assets of $51.3 billion and operating revenues of $27.8 billion. Much public attention focused on the size of the merging companies, but the combination also raised serious competitive issues.

The authorities reviewing the merger were most concerned about the merger's effects on potential competition, although other competitive issues were raised. The two firms were not head-to-head competitors in any relevant antitrust market when they announced their merger. Each supplied essentially the same range of telecommunications services, but to different consumers in adjacent East Coast regions. The Telecommunications Act of

Steven Brenner consulted with and filed testimony for MCI Telecommunications Corporation with
the New York Public Service Commission analyzing this merger. The author would like to thank
David Rivers and Guillermo Petrei for research assistance and to acknowledge the contributions of
Professor Franklin M. Fisher of M.I.T. to the analysis of this merger for MCI, but the author alone
is responsible for the views expressed here.

-73-

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