HELLERSTEIN REGULATORY REVIEW - Premiere Issue: June 8, 1998
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Welcome to the first issue of HELLERSTEIN REGULATORY REVIEW, a monthly free newsletter covering significant regulatory developments in the telecommunications and technology industries. The newsletter is published by Hellerstein & Associates, a telecommunications and technology research group that provides its clients with a competitive edge through market research, regulatory analysis and competitive intelligence.

As this is the first issue, I would like to ask my readers what type of issues or topics you would like most to read about. Please send all comments or suggestions to Judith Hellerstein at Judith@jhellerstein.com .

This issue will focus on international competitiveness and related antitrust issues, between the US and the European Union. The subject for this first issue is the lecture given by European Union Competition Commissioner Karel van Miert at the Economic Strategy Institute on Friday, June 5, 1998.

Commissioner van Miert spoke about the signing of the second antitrust competition agreement between the US Department of Justice and the European Union. This agreement allows for the exchange of confidential information and establishes procedures that will achieve the most efficient and effective enforcement of competition law. The sharing of information will allow for better coordination of resources and could lead to stronger enforcement of competition law as the two largest trading partners would speak with one voice.

The agreement allows for one country, either the US or the EU, to ask the other country to investigate the activities of any company, and also to remedy anticompetitive activities, if the country finds that the main effect of the discrimination or antitrust issues are felt in that particular country. This type of set up allows companies to remain focussed on their business objectives rather than having to divert these resources to responding to various requests by government and regulators for information and data. For instance, since the main effect of Microsoft's alleged discriminatory actions were primarily felt by US companies, the EU Competition Commission deferred to the US antitrust authorities and refrained from initiating investigations into Microsoft .

Van Miert stated that his main concern is to ensure that the European market remains open so that competition is allowed to take root. Moreover, he voiced his desire to create a set of common competition principles that would result in similar antitrust policies between the US and the EU. The joint antitrust agreement between the US and the EU is one such policy; however, this agreement is not effective for mergers and acquisitions because this authority cannot be deferred to any other authority.

In the coming weeks, van Miert will be working on developing more fully some of the key tenets of the EU competition policies, specifically, how to better enhance the growth and development of technology without resorting to the creation of either public or private monopolies. Van Miert's strong stand against the creation of monopolies was one of the key reasons why he voted against the merger of Deutsche Telekom, Kirch, and Bertelsmann.


Van Miert then turned to the antitrust concerns caused by the merger agreement between WorldCom and MCI Communications. Van Miert elaborated on several statements he had made earlier in his visit regarding his views on the merger. Van Miert stated that the concerns he had with the planned merger revolved around the monopoly the combined company would have over the Internet backbone. He stated that he did not say that the only way that WorldCom/MCI could resolve the antitrust concerns was through the sale of UUNET Technologies, rather he had stated that a sale of UUNET Technologies would be more than adequate to resolving the problem. This did not mean that the sale of UUNET was required, or even a preferable option.

WorldCom and MCI tried to resolve van Miert's antitrust concerns by selling MCI's Internet backbone to Cable & Wireless; however, van Miert felt that the sale as currently structured did not erase all of his concerns and asked the parties to try again. Van Miert, however, stated that he is confident that WorldCom will submit a revised offer to the Competition commission and that this offer will resolve many of the Commission's concerns, thereby allowing van Miert and the other Commissioners to approve the merger. Hellerstein & Associates also believes that WorldCom will come back with a revised offer as the synergies and cost savings between the two companies are significant and closing the deal quickly is in their best interest.

Van Miert's problems with this sale were that not all business contracts tied to the backbone were sold. Van Miert stated that unless all business with MCI was totally divested, including the telecommunications services connected to the Internet backbone, the possibility still exists for discriminatory and antitrust actions. The main problem here stems from the tight integration of MCI's voice, data, and Internet networks. Since only the actual hardware that is attached to the Internet backbone was sold and not any other services or business contracts the possibility for discriminatory and anticompetitive actions exists once the merger between MCI and WorldCom has been consummated.
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Topics covered in the HELLERSTEIN REGULATORY REVIEW were chosen because of their interest to the work of Hellerstein & Associates. Please send all comments or suggestions to Judith Hellerstein at Judith@jhellerstein.com