In the big-money world of telecommunications, the little guys are preparing to battle back.
WASHINGTON — In the big-money world of telecommunications, the little guys are preparing to battle back, but with limited funds they are plotting to take their attack directly to regulators and antitrust officials.
A half-dozen independent telecom companies led by XO Communications have banded together to fight the pending megamerger of SBC Communications and AT&T and the possible merger of MCI with either Verizon Communications or Qwest.
Unlike traditional telecom dust-ups, which have usually involved many millions of dollars and high-profile advertising campaigns, this one will emphasize the efforts of a tight cadre of experts on federal regulation who will make legal and financial arguments to the officials at the Justice Department and the Federal Communications Commission who approve terms of the mergers.
The companies intend to argue that they will be swamped by the larger companies unless the government puts curbs in place. Their argument will be marshaled by financial data, market research and legal scholarship, rather than the arm-twisting of lawmakers or the courting of the public at large, which are the most common tacks for groups that want to influence the government.
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The group, so new it doesn’t have a name, has hired as one of its top lawyers Gary Reback, who famously pushed the federal government to pursue its antitrust case against Microsoft and who organized other well-known antitrust lawsuits. Other members of the team are former senior insiders in federal regulatory agencies that have a say in the proposed mergers.
The companies acknowledge that their effort is uphill. “It is a David and Goliath situation,” said Carl Grivner, chief executive of XO, in suburban Reston, Va. But “I’m optimistic that this will get the proper review.”
The other companies are Savvis Communications, Eschelon Telecom, Cbeyond Communications, Covad Communications Group and Broadwing Communications.
The independents, which provide specialized telecom services to businesses, are angling for ways to continue to provide those services after the mergers.
They worry that the mammoth enterprises resulting from the consolidation will stifle the kind of innovation they claim their smaller companies have long provided.
For years, XO and its fellow independents warred against Baby Bells, such as SBC and Verizon, in conjunction with AT&T and MCI. Now that both of their former allies are on the verge of being gobbled up by Baby Bells, the independents have decided to stand together in general opposition to the mergers.
The group’s exact position so far is vague. “I don’t have an answer right now what package of remedies that will be pursued,” Reback said.
Grivner and Reback said the group will try to make headway with the Justice Department’s antitrust division, the FCC and selected lawmakers who can express to the regulators views sympathetic to the independents’ cause.
“For the most part, this will be an inside game,” Grivner said.
That will stand in sharp contrast to the usual fireworks in telecom lobbying. Since 1998, for instance, AT&T spent $75 million on federal lobbying, not far behind Verizon, according to the nonpartisan Center for Public Integrity. SBC spent $73 million.
XO’s group will spend “millions of dollars, meaning more than 1 million,” Grivner said.
Analysts said the independents probably hope to persuade the government to require the merged companies to give favorable, or at least flexible, treatment to their competitors and that they may succeed in doing so.
“They have little chance of blocking the mergers and a reasonable chance in getting them conditioned,” said Scott Cleland, chief executive of the Precursor Group, a research company based in Washington, D.C.