Editorial: Hard look needed on this combo

Thursday, Oct. 7, 1999 | 9:26 a.m.

It is encouraging that the Federal Communications Commission's chairman on Tuesday sent an unmistakable signal that he was going to view skeptically MCI WorldCom's bid to buy Sprint Corp. If the deal ultimately wins approval by federal regulators it would be the biggest merger ever, bringing together the second- and third-largest long-distance phone companies.

While corporate officials were talking giddily about the benefits for shareholders, FCC Chairman William Kennard was throwing in a dose of reality, saying that the companies would "bear a heavy burden to show how customers would be better off" under a merger. "American consumers are enjoying the lowest long-distance rates in history and the lowest Internet rates in the world for one reason: competition," Kennard said. "Competition has produced a price war in the long-distance market. This merger appears to be a surrender. How can this be good for consumers?"

Closer to home, there also is concern about what fallout there may be on Sprint's local phone company serving Southern Nevada. Many analysts believe that long-distance giant MCI is likely to sell Sprint's local phone companies, concentrating on wireless and the long-distance market. Jeanne Schaaf of Forrester Research told the Kansas City Star that MCI has little interest in rural markets, where most of Sprint's local phone companies are located. "These folks are inclined to take the money and run ... I think MCI would trash it," Schaaf said of Sprint's local phone service division. There are different circumstances in Las Vegas, though, considering that Sprint's phone company serves an urban area undergoing tremendous expansion and accounts for 11 percent of all of Sprint's local telephone lines in the United States. Still, all that growth, as a Sun story noted Tuesday, has meant that Sprint has had to spend $170 million a year to match the population boom, causing a negative cash flow for the local phone company here, which might not be attractive to MCI.

Public Utilities Commission Chairman Don Soderberg said it's too soon to determine whether Nevada law gives state regulators the power to review the merger. State Consumer Advocate Fred Schmidt said if there are financial benefits from the merger, he believes Nevada customers should also see some of these savings. Another area that regulators should review critically is maintaining good customer service. There might be a temptation for MCI to cut costs and reduce customer service, since the company might not view a local phone company as an important asset.

Mergers in nearly every sector of the economy have been occurring at dizzying speeds in recent years. Regulators should take a long, hard look at this proposed merger before signing off, making sure that consumers won't be harmed by having fewer choices, getting less customer service and paying higher prices for their long-distance service.