The Antitrust Revolution: Economics, Competition, and Policy

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

CASE 4
The Long-Distance Industry:
One Merger Too Many?
MCI WorldCom and Sprint (2000)

Michael D. Pelcovits


INTRODUCTION

On October 4, 1999, MCI WorldCom and Sprint announced an agreement to merge. At the time of the agreement, the two companies were the second and third largest traditional long-distance companies in the United States, and the first and second (or third)1 largest providers of Internet backbone service. Large portions of the two companies' business activities overlapped, which raised concern about competitive impacts, especially because the long-distance industry had consolidated significantly in the years prior to the merger announcement. MCI WorldCom itself was created by the merger of WorldCom and MCI one year earlier. This prior merger was hotly contested, and received government approval only after MCI agreed to divest its Internet business. In fact, Chairman William Kennard of the FCC remarked that with the approval of the WorldCom-MCI merger the industry was “poised just a merger away from undue concentration” (FCC 1998b).

The proposed merger was subject to intense scrutiny by a host of government agencies. After almost nine months of discovery, filings, meetings, and hearings, the applicants dissolved the agreement in the face of opposition from the U.S. Department of Justice (DOJ) and the Commission of the

Michael D. Pelcovits was Chief Economist of MCI WorldCom during this case. The author wishes
to thank Tony Epstein for helpful comments. The views expressed in this chapter do not represent
official views of MCI WorldCom.

1The parties to this case disputed Sprint's rank among Internet backbone providers.

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