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Regulatory Growth or Business As Usual?
With the recent spate of telecommunications mergers halted in their tracks internationally by concerned governments, some analysts are claiming that regulators are dampening marketplace growth, but policymakers and antitrust authorities say the system is working.
"Each jurisdiction has to examine the merger if it is going to hurt consumers in those jurisdictions," said Bernard Phillips, the head of competition policy at the Organization for Economic Cooperation and Development (OECD) in Paris.
Telecommunications giants WorldCom and Sprint this week likely will abandon their pending $129 billion merger that would have allowed them to dominate the world's access to the Internet, according to news reports. Without WorldCom, Sprint may become a very attractive takeover target for foreign companies such as Germany's Deutsche Telekom, France Telecom or Spain's Telefonica. But as a Federal Communication Commission official told The Wall Street Journal, any such deal would meet the heavy hand of regulatory scrutiny.
The ailing WorldCom/Sprint merger may a growing trend toward closer government scrutiny of similar megamergers.
"There is no question that we are still in the midst of a significant merger wave," said Raymond Pierce, assistant deputy commissioner of mergers at the Canadian Competition Bureau. "If you compare the number of transactions we are reviewing, it has doubled. The complexities have increased. We live in the age of the megamerger."
But Pierce cautioned that businesses and consumers should not draw any broader conclusion from the recent decisions of the European Union’s regulatory arm, the European Commission, or the U.S. Justice Department to block proposed mergers.
"[Mergers] are decided on a case by case basis," Pierce said. "The vast majority of mergers are neutral or pro-competitive in impact."
But in London, Nick Herbert thinks differently. Herbert is executive director of Business for Sterling, a non-profit organization that dedicates its efforts to lobby against British entry into use of the euro, the single currency of the European Union’s trading zone.
Herbert contends that the European Union's regulatory stance is destroying Europe's competitive edge globally.
Backed by high profile businesses that demand anonymity for their participation in Business for Sterling, the group's efforts signal British companies' fear that joining the euro will devalue British currency, and cause stringent regulations. And while Britain is the leading economy in European Union, increasing ties to it would lessen the EU’s "incentive to reform," said Dominic Cummings, head of research for Business for Sterling.
Other businesses have seen similar difficulties. The European Commission may block Microsoft’s proposed buyout of Britain's Telwest Communications, according to a draft proposal which was revealed Monday. The software giant said on Wednesday that it had made new concessions to the European Commission in a last-ditch effort to save its planned purchase. Microsoft is seeking to buy MediaOne's 29.7 percent stake in Telewest, in a $3 billion deal which would give Microsoft joint control of the company with Liberty Media Group.
Microsoft also is under investigation for supposed dominance in the server market in Europe. America Online and Time Warner also await the commission’s decision for their proposed merger.
Additionally, there have been an increasing number of trade disputes between the United States and Europe in a variety of other industries, such a beef production and cheese manufacturing, which often lead to charges of trade protectionism. In a letter to the Federal Communications Commission voicing opposition to a possible Deutsche Telekom purchase of Sprint, for example, Sen. Ernest Hollings, D-SC, asserted that telecommunication companies like Deutsche Telekom operate in a protected market, where government ownership in such industries can level unfair advantages.
Several big mergers recently have faced much more scrutiny in Europe than in the United States. Boeing and McDonald Douglas deal is one example where the United States easily blessed the union while the commission required remedies before it would approve the deal. Likewise Boeing's bid to purchase Hughes Electronics is under competition review.
But competition review is as much agreed upon in the United States as it is elsewhere in the world. Pierce suggests that the process only require more transparency to ensure that it works soundly.
But there is wide debate over whether regulations are increasing or decreasing.
"Everywhere we look, there is a move to sound competition policy in Europe," said the OECD's Phillips. The vast majority of mergers go through without any disputes whatsoever. He noted the effect shows a movement away from a controlled economy and more regulation. "The broader market trend is for free market principles."
Combating a Global Divide
Last Thursday concluded the Organization for Economic Cooperation and Development's Forum 2000, held in conjunction with the OECD ministerial meetings, where the "digital divide" attracted attention and stirred debate over the ways in which countries should stimulate economic growth in development regions of the world.
Some speakers touched on the issue of access while Ylva Johansson, president of European SchoolNet, talked more of the problem with the quality of access. It was a theme echoed by Kent McGuire, assistant secretary in the office of educational research and improvement at the U.S. Education Department, who noted that while connectivity levels have risen in the United States, the quality of that access is still a barrier. For example, low-income children tend to have much slower and more complicated access to the Internet than affluent children.
United Nations Kicks Off IT Conference
The three-day United Nations conference in New York on Internet Technology begins Wednesday. Aimed again at tackling the challenge of worldwide Internet deployment, it too seeks to find ways to patch the global "divide" between technology haves and have nots. The event will host Vice President Al Gore, as well as a host of technology experts, and among the issues likely to be discussed are intellectual property, the legality of Internet security and privacy. The conference will focus more on solutions rather than the debate over digital divide. Many experts have argued that Internet deployment in less-developed areas in the world would be fruitless until the sociopolitical situations are stabilized.
- by Maureen Sirhal
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