Case Assignment: Bell-Atlantic/NYNEX Economics 33

For class discussion Tuesday, April 27^th Prof. Stephen Schmidt

Read the case “Potential Competition and Local Telephone Service: The Bell-Atlantic/NYNEX Merger” in Antitrust Revolution (pages 73-100). There is no written question for this case. Be prepared to discuss the following questions in class. Also prepare two questions of your own regarding the case to ask in class discussion.

1. Why did this merger raise competitive concerns even though Bell Atlantic and NYNEX did not compete against each other in any market? What is the difference between an "actual potential competitor" and a "perceived potential competitor"? Which is more likely to increase the competitiveness of a market, and why?

2. Why did Bell Atlantic and NYNEX describe MFS and other CAPs in the New York City market (page 80)? What point were they trying to make? What concern about competition did this point alleviate?

3. Are switched service and dedicated service separate markets, or not? Why do you think so? Does it favor the merger, or hinder the merger, if they are deemed to be separate markets?

4. Why did Bell Atlantic and NYNEX think the number of CLECs, and applications to be CLECs, were important to the case? Why did the FCC disagree? What is the most important point on which the applicants and the FCC have different views? Whose argument do you agree with, and why do you agree with it?

5. Bell Atlantic frequently advertised on New York City TV and radio stations, despite not selling telecommunications of any form in New York City. Why did they do so? What market or markets were easier for them to enter because they had done so? Why did it matter to the assessment of competition in New York City?

6. FCC thought the merger would have negative consequences, but allowed it anyway. What did Bell Atlantic and NYNEX promise to do in order to secure FCC approval? How did the promised actions reduce the concerns of the FCC about negative consequences of the merger?

7. Should the FCC have blocked the merger? If you think so, what do you think has been the most harmful consequence of the merger? If you think not, what has happened since the merger that has done the most to prevent harmful consequences of the merger?