Washington, D.C., March 20, 2000 - Nearly every American will
be able to choose among three or more facilities-based long distance
networks - in addition to hundreds of resellers -- even after the MCI
WorldCom-Sprint merger closes, the companies told the FCC today. In
their formal response to comments on the merger submitted to the
Commission by outside parties, MCI WorldCom and Sprint provided data
showing that more than 98% of the U.S. will be served by at least three
facilities-based carriers, with more than 90% served by four or more
such carriers.
"These results clearly demonstrate that emerging carriers have
become a major force in the traditional long distance market," said
Michael H. Salsbury, MCI WorldCom general counsel. "Even as the telecom
market overall continues its shift to an 'all-distance' model,
competition for long distance customers will continue to
accelerate."
MCI WorldCom and Sprint demonstrated to the FCC that it is price,
not brand, which prompts consumers to switch long distance carriers.
This finding counters claims submitted to the FCC by monopoly Bell
operating company SBC, the companies said.
Customers Exercise Freedom to Choose
A study submitted with the companies' joint reply comments shows
that MCI WorldCom and Sprint customers switch disproportionately to
emerging carriers rather than between the two companies. In fact, more
than a third of customers that switched from MCI WorldCom or Sprint in
a 12-month period switched to an emerging carrier, the companies
said.
MCI WorldCom and Sprint point out that the ability of emerging
carriers to compete is more than theoretical, as demonstrated by the
investment of companies like Qwest, Broadwing, Level 3, Williams and
Frontier in nationwide networks. These carriers, and those that resell
their services, have already captured a significant share of the
traditional long distance market, said MCI WorldCom and Sprint.
"By completely ignoring the role of the emerging carriers, our
critics have presented a grossly skewed snapshot of competition in the
long distance market," said J. Richard Devlin, Sprint executive vice
president and general counsel. "Consumers and business customers alike
look for the best deal and service, regardless of whom the carrier
is."
MCI WorldCom and Sprint also emphasized that emerging carriers are
increasingly bidding for and winning high volume, long-term contracts
for larger business customers.
Bell Long Distance Entry on the Rise
Claims by critics that widespread Bell company entry into the
traditional long distance market might not come soon enough to hold
down possible price increases are wrong, MCI WorldCom and Sprint
said.
In addition to being authorized to provide long distance in New York
and applying to do so in Texas, Bell companies have announced near-term
plans to enter states that account for a huge share of the long
distance market, the companies noted. Reductions in long distance
prices by Bell companies in those states will compel traditional long
distance carriers to continue lowering their rates even further. And
because of federal requirements, pricing pressure in just one state
leads to nationwide reductions, said MCI WorldCom and Sprint.
Various Bell companies have identified 12 states where they plan to
seek long distance authority by fall of 2000 - approximately the time
MCI WorldCom-Sprint merger will close. Combined with New York and
Texas, these states account for more than half of U.S. long distance
traffic and lines, MCI WorldCom and Sprint pointed out. Now that the
FCC has provided the Bell companies with a "roadmap" to gaining long
distance entry through its recent approval of Bell Atlantic-New York's
application, there is every reason to expect that Bell company
expansion into the long distance market will accelerate.
Internet Backbone Market will Continue Strong Growth
MCI WorldCom and Sprint also submitted extensive information to the
FCC demonstrating the highly competitive nature of competition among
Internet backbone providers. Economic analyses show that fiber capacity
is increasingly available, allowing easy access by competitors to the
market. Further, market conditions prevent any company from dominating
the backbone market, MCI WorldCom and Sprint stated.
While information submitted to the FCC shows that backbone providers
will continue to compete vigorously after the merger is completed, the
companies also acknowledged once again their commitment to work with
regulators who might still have concerns over the addition of Sprint's
Internet backbone assets to those of MCI WorldCom.
The MCI WorldCom-Sprint filing also makes it clear MCI's spinoff
of Internet assets as a condition of its merger with WorldCom
demonstrates that a backbone business can be successfully divested. The
divestiture succeeded in transferring MCI's substantial Internet
assets to a competing service provider, Cable & Wireless, that has
used them to enhance its position as an effective, facilities-based
alternative to MCI WorldCom and other major providers of Internet
backbone services, MCI WorldCom and Sprint said.
MCI WorldCom (NASDAQ: WCOM) is a global leader in
"all-distance" communications services with operations in
more than 65 countries. Revenues in 1999 were $37 billion, with more
than $15 billion from high-growth data, Internet and international
services. MCI WorldCom and Sprint have announced a merger agreement,
which the companies expect to close in the second half of 2000 after
regulatory and shareholder approvals. For more information go to
http://www.wcom.com.
Sprint is a global communications company - at the forefront of
integrating long distance, local and wireless communications services.
Sprint built and operates the United States' first nationwide
all-digital, fiber-optic network and is a leader in advanced data
communications services. Sprint has $17 billion in annual revenues and
serves more than 20 million business and residential customers. Sprint
is traded on the NYSE under FON and PCS. For the latest updates on
Sprint, check http://www.sprint.com.
