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Federal Communications Commission
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This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

March 13, 1998


FCC Chairman William Kennard warned that approval of Bell entry into long distance before local markets are open will create megamergers, not competition.

In warning of unwarranted consolidation, Kennard said that if the FCC "permit[s] Bell entry before the local market is open to competition, long distance companies will have no alternatives but to merge with an ILEC."

He made these remarks at the Legg Mason "Telecom Investment Precursors" Workshop in Washington, DC.

He said, "the section 271 mechanism promotes competition in the local market at the same time it enhances competition in the long distance market. What would happen if the Bells were able to enter the long distance market before their local markets were open to competition? The Bells tell everybody -- especially you in the investment community -- that consumers want 'one-stop-shopping.' If you believe that, then the result would be mergers and consolidation."

Kennard was critical of attacks on the Congressional roadmap for competition and deregulation, noting "litigation has slowed investment and planning, frustrated promising entry strategies and led to widespread uncertainty throughout the business community. What has gotten mired in litigation is the roadmap to progressive deregulation."

He noted, "Creating immediate alternatives to incumbent LEC services through purchases of unbundled facilities would have allowed prompt retail deregulation and interstate access deregulation. And we may have lost the chance to step outside the archaic model of telecommunications services regulation where we classify all costs and separate them between jurisdictions."

Kennard went on to say that there is also good news in that the ability to use section 271 for deregulation and competition purposes is still working. "Section 271 -- properly implemented -- gives BOCs an affirmative incentive to open local markets . . . [and] . . . promotes competition in the local market at the same time it enhances competition in the long distance market."

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