The European Commission was last week expected to outline to WorldCom and MCI Communications its concerns over their planned merger, said a Commission source who asked not to be identified.
Although the Commission has until early July to make a final decision banning, approving or requiring changes to the venture, this so-called statement of objections signals the concerns are serious and will have to be addressed if the companies want to proceed with the merger. Such a statement is, however, a normal part of a merger investigation.
The Commission's concerns focus on whether the merger creates a dominant position that it can prohibit under its anti-trust responsibilities and if not, how the merger will affect long-distance Internet communications and competition within the EU, the source said. Information collected from competitors has raised fears the merger's market power could squeeze out competitors and raise prices for Internet service providers (ISPs).
In talks and submissions to the Commission after it was notified of the merger in early March, competitors have estimated the merger will control 23 per cent of all transatlantic Internet traffic - second to AT&T's 29 per cent share.
Greater Net control
However, competitors also estimate the venture will control 40 to 50 per cent of all Internet traffic in the US, and that roughly 40 per cent of all ISPs are linked to the merger partners' networks in the US. These figures are relevant to the European market since most European Internet services are linked to the US, the source explained.