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Level 3 CEO James Q. Crowe Comments On The WorldCom/Sprint Merger and Issues Concerning Competition In The Telecommunications Industry
DENVER, CO, June 30, 2000 – Level 3 Communications, Inc. (Nasdaq:LVLT) today released the following comments, which can be attributed to James Q. Crowe, president and CEO of Level 3.
"The possibility of a merger between WorldCom and Sprint has become a catalyst for larger discussions regarding competition and regulatory oversight of competition in the telecommunications industry. There has been no small amount of confusion as to what issues should be considered in terms of the merger and, in a larger sense, in terms of fostering competition."
"There has been some misinformation and misunderstanding surrounding these issues. Most recently, an editorial in The Wall Street Journal (June 23, 2000) misrepresented Level 3's position by stating that we and others were opposed to the merger because the combined companies would have too great a market share. This editorial not only misstates our position, but, more importantly, it misses the point."
"Market share or size, in and of themselves, are not the issue. There is a far more important issue - largely overlooked - which has always been the single most important factor that enables or defeats competition."
"The free, open and competitively neutral interconnection of competing networks is the real key to competition. In the emerging Internet industry, interconnection is called "peering". Whatever you call it, it is the single most important gatekeeper to competition. It lets information flow unimpeded from one company's network to another's, allowing users of one network to communicate with users of another network."
"We have consistently told the Justice Department, the European Commission, the FCC and others, that competition in communications, like other "networked" industries such as electric power, railroads and airlines, depends on open, cost effective and non-discriminatory connection of the networks of competing companies."
"In our business, this has been clear since 1913 when the federal government forced AT&T to interconnect its long distance network with competitors' local networks. Prior to that time, AT&T used refusal to interconnect to force local phone companies to accept its buyout offers or go out of business."
"In the decades that have followed, refusal to interconnect has been used over and over again by dominant service providers to disadvantage or eliminate smaller competitors. And in each case, mandated interconnection on open and fair terms has been the key to establishing vigorous competition. In fact, the event that was arguably one of the root causes of America's enviable strength in global communications, the breakup of AT&T in 1982, was the result of a lawsuit by MCI (now part of WorldCom) which, in part, concerned refusal to interconnect."
"We at Level 3 believe that open and fair interconnection is just as important to the development of a competitive Internet backbone industry as it was to the development of the competitive telephone services market. In keeping with that view, we believe that proposed mergers of companies with substantial Internet backbone market share should be conditioned on consent to adhere to the principles of open and fair interconnection. We advocate this kind of consent as a prerequisite to the WorldCom and Sprint merger."
"We believe this requirement should put little or no additional burden on the combined companies since we understand both agree, at least in principle, on the value of interconnection."
"In the traditional long distance voice market, interconnection is a regulatory requirement and has been since the aforementioned breakup of AT&T. No one questions the merit of interconnection in this market. In fact, it is questionable whether or not either WorldCom or Sprint would exist today without the benefits of this competition-friendly policy. The real question to be asked is why anyone favoring competition among Internet backbone service providers would oppose appropriate interconnection requirements in this market."
"So far, our arguments have not been persuasive to either the European Commission or to U.S. regulators. Both seem to prefer so-called "structural" remedies such as divestitures of various assets. These actions may be symbolically satisfying but they do little to stimulate and protect real competition."
"Hopefully, our views concerning the desirability of open and fair interconnection agreements with competitors as a merger condition are clear."
"I also want to make our position concerning the proper reasons for any regulatory opposition to the merger equally clear. Neither the European Commission nor U.S. regulatory bodies should block the merger or require divestitures as a precondition simply on the basis of a market share that is "too big"."
"The communications phenomenon we call the Internet is still in its infancy. We believe that taking antitrust action based on market share in this market is analogous to taking action against Lotus (now part of IBM) because its share of the spreadsheet software market was too large. In both cases, rapid change renders such actions at best, moot and at times, adverse to the goal of increased competition."
"Level 3 advocates a policy that should be applied to Internet backbone companies, but this policy is not derived from a view of some maximum acceptable market share."
"Interconnection, not market share, is the key to broad based and vigorous competition."
James Q. Crowe is the President and CEO of Level 3 Communications, Inc., former Chairman of WorldCom, Inc. and former Chairman and CEO of MFS Communications, Inc. Mr. Crowe has also served on the Board of Qwest Communications International, Inc.
(*Softswitches are advanced software based switching systems, which enable Level 3 to provide services combining the best features of the Internet and traditional telephone networks.)
About Level 3 Communications
Level 3 Communications, Inc. (NASDAQ: LVLT), an international communications company, operates one of the largest Internet backbones in the world, connecting 180 markets in 18 countries. The company serves a broad range of wholesale, enterprise and content customers with a comprehensive suite of services including: Internet Protocol (IP) services, broadband transport and infrastructure services, colocation services, voice and voice over IP services, content delivery and media distribution services. These services provide the building blocks to enable Level 3’s customers to meet their growing demands for advanced communications solutions. The company’s Web address is www.Level3.com.
"Level 3 Communications,” "Level 3," the red 3D brackets and the Level 3 Communications logo are registered service marks of Level 3 Communications, LLC in the United States and/or other countries. Level 3 services are provided by wholly owned subsidiaries of Level 3 Communications, Inc. Any other service, product or company names recited herein may be trademarks or service marks of their respective owners.
Forward-Looking Statement
Some of the statements that we make in this press release are forward looking in nature. These statements are based on management’s current expectations or beliefs. These forward looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside our control, which could cause actual events to differ materially from those expressed or implied by the statements. The most important factors that could prevent us from achieving our stated goals include, but are not limited to our ability to: successfully integrate acquisitions; increase the volume of traffic on our network; defend our intellectual property and proprietary rights; develop new products and services that meet customer demands and generate acceptable margins; successfully complete commercial testing of new technology and information systems to support new products and services; attract and retain qualified management and other personnel; and meet all of the terms and conditions of our debt obligations. Additional information concerning these and other important factors can be found within Level 3’s filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
