FCC Memo Raises Problems With an MCI WorldCom, Sprint Merger

WASHINGTON — A Federal Communications Commission internal memorandum calls the proposed $129-billion merger of MCI WorldCom Inc. and Sprint Corp. an “intolerable” blow to competition--the latest sign of the regulatory difficulties facing the mega-merger.

The Oct. 21 memo obtained by the Washington Post was written by Tom Krattenmaker, the research director of the FCC’s Office of Plans and Policy. He has led the assessment of a host of enormous mergers and formerly worked in the Justice Department.

Knowledgeable sources previously have told the Post that federal regulators are unlikely to approve the deal because it would place 80% of the nation’s long-distance business in the hands of two companies: AT&T; Corp. and the new WorldCom.

Krattenmaker’s memo, addressed to FCC Chairman William E. Kennard and other officials, highlights two issues: Both companies own substantial Internet “backbones”--the networks that carry computer data--and they are the nation’s second- and third-largest long-distance providers.

“This will raise the most troublesome issue,” Krattenmaker said, echoing worries similar to those expressed by Kennard. “Any further consolidation among the major [long-distance] providers would be intolerable, especially in its impact on residential subscribers.”