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Justice widens MCI probe
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March 10, 1998: 11:07 a.m. ET
Regulators eye Internet access in WorldCom's proposed $37B deal
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NEW YORK (CNNfn) - The Justice Department is widening its probe of WorldCom Inc.'s proposed $37 billion acquisition of MCI Communications Corp.
The Justice Department has sent out information requests to competitors in a bid to determine how much Internet access the new company would control.
Nevertheless, MCI believes its proposed deal with Worldcom will be completed by the middle of the year.
But the heightened scrutiny signals that the companies may face a stiffer test than they had hoped for in overcoming regulators' antitrust concerns.
MCI spokesman Frank Walter said his company has been asked for more information, specifically about its Internet operations.
Walter said he believed the magnified inquiry by the Justice Department would not affect the closing of the deal, now expected for the middle of 1998. Additionally, he said he didn't expect MCI (MCIC) would have to divest any of its operations to soothe antitrust concerns.
The Justice Department is apparently querying competitors to get a sense of how much of the Internet is controlled by various companies to see if a possible deal between MCI and WorldCom (WCOM) could lead to the new company cornering a major part of the data network's traffic.
Those companies which provide Internet services and received requests for additional information include IBM Corp. (IBM), GTE Corp. (GTE) and Sprint Corp. (FON).
Sprint spokesman Bill White said his company got an information request on February 12 from Justice after having received its first questionnaire in November.
White said the request contained questions about how much data traffic Sprint carries over its Internet backbone, a trunk line for computer communications, and also about so-called "peering arrangements," which are agreements made between Internet service providers to carry each others' traffic.
Sprint, among others, has been concerned that, from an Internet perspective, a MCI-WorldCom company becomes the largest data carrier and thus will be able to set prices for data traffic. Currently, Sprint, MCI and WorldCom carry the same amount of traffic separately and do not charge each other for peering.
MCI's Walter said allegations that its combination with WorldCom will result in a behemoth which could rule the Internet are "unfounded."
The merged firms would have 20 percent of the Internet market in terms of revenue and be competing against 40 other Internet backbone providers.
"The combined company would not be able to control pricing or peering because of the immense competition in the field," said Walter, who added that the Internet arena is very easy for new entrants to set up shop in.
MCI and WorldCom shareholders will vote on the proposed merger Wednesday.
Officials for the other involved companies were not immediately available for comment.
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