Editorials
Wednesday, October 6, 1999Telephone takeover
could help consumersTHE world of telecommunications changed forever in 1984 when the federal government forced AT&T to divest its local telephone monopolies and compete in the long-distance market.The issue: MCI WorldCom agreed to pay $129 billion for Sprint Corp., in the largest corporate takeover to date.
The telecommunications world changed again in 1996 when Congress passed a sweeping overhaul of the legal framework, aimed at opening the entire field to competition.
Now "Ma Bell's" two leading competitors, MCI WorldCom and Sprint Corp., have agreed to combine in a deal that would be the largest corporate takeover to date. MCI WorldCom, the nation's No. 2 long-distance carrier, agreed to pay $129 billion for Sprint, the No. 3 carrier. An offshoot of the breakup of AT&T, BellSouth Corp., was an unsuccessful bidder for Sprint.
The combined company, to be called WorldCom, would control 30 percent of the U.S. long-distance market and offer wireless phone and paging services and an Internet network.
Since enactment of the 1996 law, most of the "Baby Bells," long-distance carriers and wireless communications providers have engaged in a frenzy of mergers and acquisitions. The Sprint-MCI WorldCom deal is the latest -- and the biggest.
Not counting Sprint-MCI WorldCom, there have been 233 telecom deals this year totaling $195 billion. With the latest announcement, this year's total would far surpass the $220 billion in telecom deals last year.
Earlier AT&T purchased Tele-Communications Inc. (TCI), the nation's second largest cable provider. It plans to use TCI's cable connections to 13 million homes to provide local and long-distance telephone service and high-speed Internet access, as well as television.
AT&T also contracted with Time Warner, the nation's largest cable firm, to lease its network and provide the same services.
MCI WorldCom, in addition to being the nation's second biggest long-distance company, is one of the world's biggest operators of the networks that make up the Internet, but has no wireless calling business. Sprint PCS would fill that gap.
The chairman of the Federal Communications Commission, William Kennard, responded skeptically. "Competition has produced a price war in the long-distance market," he said. "This merger appears to be a surrender. How can this be good for consumers?" Kennard warned that "the parties will bear a heavy burden to show how consumers would be better off."
The answer appears to be that WorldCom should be a stronger competitor to AT&T, which is still the largest long-distance and cable TV company. This could result in benefits for consumers, although long-distance and wireless calling rates are currently at historic lows.
With telecommunications companies moving into cable television and other new markets, consumers might be offered more attractive combinations of telephone, television and Internet services. But the dealmakers will have to show that the takeover would be good for consumers.
Second Chechen war
RUSSIANS reached an agreement with separatist Chechen leaders more than three years ago deferring the issue of sovereignty, but a peaceful solution now seems unlikely. Terrorist attacks have brought a Russian military response, and Chechnya President Aslan Maskhadov's enlisting of a leading militant dims the prospect for a truce.
After a two-year war, Russian and Chechen leaders in August 1996 signed a truce providing for a Russian pullout and postponing the issue of Chechen sovereignty for five years. Maskhadov, a former rebel chief-of-staff, was elected president in January 1997 with 65 percent of the vote on a platform calling for independence and some elements of Islamic law.
In August and September, Muslim militants in Chechnya invaded neighboring Dagestan seeking to enlarge the Islamic state in southern Russia.
Also last month, a series of bombings in Moscow and elsewhere in Russia killed about 300 people. Maskhadov enlisted into the Chechen armed forces Shamil Basayev, whom Russia blames for the bombings.
Air strikes and ground attacks have given Russia control of one-third of Chechnya, while Maskhadov vowed defiantly that Chechnya "will not give up a single square meter of land."
The Russian attack has caused more than 100,000 Chechens to flee into the adjacent region of Ingushetia despite warnings of severe shortages in clothing, food and medicine. Western relief efforts have been hampered by security concerns. At all levels, the situation seems to be worsening.
Russian Prime Minister Vladimir Putin's stance that Chechnya is "Russian territory" may be politically popular, but it fails to recognize the Chechens' history of mistreatment and their understandable disdain for the Russians.
Josef Stalin deported the entire Chechen people to Central Asia in 1944, killing tens of thousands, and it was 13 years before Nikita Khruschev allowed the Chechens to return to the Caucasus. Denying them independence any longer is asking for perpetual trouble.
Published by Liberty Newspapers Limited PartnershipRupert E. Phillips, CEO
John M. Flanagan, Editor & Publisher
David Shapiro, Managing Editor
Diane Yukihiro Chang, Senior Editor & Editorial Page Editor
Frank Bridgewater & Michael Rovner, Assistant Managing Editors
A.A. Smyser, Contributing Editor
