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Testimony Supporting Verizon / MCI merger
and AT&T / SBC Merger

For the Public Service Commission, Public Statement Hearing
Thursday, July 28, 2005
East Greenbush Town Hall

I am here today in support of Verizon and AT&T, two long-standing members of The Business Council of New York State. Verizon has proposed to acquire MCI and AT&T has proposed to merge with SBC Communications. These transactions are the next logical step in the ongoing evolution of the telecommunications industry around new technologies, new services and new providers.

Changes in technology are providing consumers with a variety of choices from a variety of service providers. Telecommunications choices are being widely provided not only by traditional wireline telephone companies, but also by the cable industry, broadband Voice Over Internet Protocol (VoIP) providers and wireless carriers. The availability of wireline and wireless packages of any duration, any distance minutes of use, Internet communication (including instant messaging), text messaging and Voice Over Internet Protocol services has blurred the traditional distinction between local and long distance service.

Wireline voice traffic no longer comprises the bulk of the time used on the public switch network, and such traffic is decreasing as a percentage of overall communications traffic. In light of these changes, a company providing only traditional wireline service could fast become obsolete.

As a result, the industry is quickly restructuring itself to provide a full array of services using new and emerging technologies in the most economically efficient way. Verizon's acquisition of MCI is intended to complement and accelerate Verizon's continuing transformation into a premier wireless and broadband provider. It is a vital strategic move for Verizon that is focused on growth and continued investment, not just on cost reductions.

Providing consumers with choices is essential, and New York State has more customer options available than almost any other state. These mergers are being examined, quite correctly, with an eye toward maintaining this important customer benefit.

A united Verizon and MCI will have an estimated 16% to 22%share of the enterprise, or large business market, and will be just one of many companies competing for business in what is widely viewed as the most competitive segment of the industry. There are many competitors in this field today, and none has acquired a dominant share of the market.

One important benefit of the MCI acquisition will be the increased ability of the combined company to compete on a national and international scale, including increased competition with SBC/AT&T. Verizon and SBC already operate as competitors today, and they will continue to compete with each other after their respective transactions, especially in the growth areas of enterprise, wireless, data and VoIP.

The MCI purchase will have no adverse impact on rates or service quality, and will greatly enhance the abilities that both Verizon and MCI now possess individually to provide a wide array of services to consumers, businesses and government customers. It will blend together two companies with complementary strengths in a way that will benefit the current customers of each company. The merger is in keeping with industry transformation and will strengthen Verizon's ability to compete for and serve large business and government customers in New York and elsewhere by improving the speed of delivery for competitively priced wireline services, broadband services, wireless services and IP-based services to that vital sector of the U.S. economy.

Some have suggested that Verizon should divest itself of MCI's fiber optic loop as a condition of acquiring MCI. We believe that this would be disruptive and potentially harmful to businesses that have chosen MCI from the slate of carriers because of its value. MCI's business customers are highly sophisticated and typically have multiple locations nationwide. They require customized solutions with secure connections. They have chosen MCI because it can successfully meet those needs. The Verizon/MCI transaction will only enhance the services MCI provides these customers.

Wall Street is the financial capital of the world - and the telecommunications infrastructure is vital to the continued strength of the companies that operate there. Denying these customers the choice of an advanced services provider by requiring the divestiture of MCI's high capacity network in New York is unnecessary and disruptive to a number of businesses that are very important to the economic well being of this state.

Verizon will be investing $2 billion in MCI's networks and systems. And Verizon will bring its state of the art wireless capabilities to the array of services currently offered by MCI. Enterprise customers supported Verizon's acquisition of MCI over that of Qwest's because of Verizon's ability to add investment and stability to the MCI network. Divesting of MCI's fiber optic loop would deprive large business customers of the benefits of choice, network integration, investment and stability.

It is in New York's best interest to promote strong, reputable companies that provide jobs, support the local community and contribute significantly to our economy. Verizon's acquisition will help stay that course. The combination of Verizon and MCI's complementary assets and capabilities will decisively benefit the public interest without harming competition in any segment of the market. It will allow Verizon and MCI to benefit from each other's strengths, ensuring that key communications networks are healthy and technologically advanced, thus strengthening the economic viability and security of America's homeland. It will create a much stronger company with the ability to prosper and grow in the fiercely competitive telecommunications industry, both nationally and globally, thus providing more stability and certainty for employees and their families than could be achieved by either company on its own.

Businesses desire more advanced telecommunications systems, customized and managed to their specifications. The combination of AT&T and SBC Communications will allow the combined company to compete more effectively in this arena. Combined, AT&T and SBC will be better positioned for success within a rapidly changing industry, setting the standard for transition from legacy technologies to advanced, next-generation IP networks and services. This merger brings in a new, well-established business player into New York State. With 52 million lines in13 states and revenues of $41 billion in 2004, SBC has been recognized as America's Most Admired Telecommunications Company by Fortune Magazine seven years in a row.

In closing I would just like to note that Verizon and AT&T have been valued members of The Business Council of New York State for many years. These companies understand the needs of the communities in which they do business and they seek ways to keep these communities socially and economically healthy. They are good corporate citizens, and their employees live and work in our communities, building partnerships that make a difference at the local level.

In 2004 alone, the Verizon Foundation awarded more than 26,500 grants totaling $71.4 million to charitable and nonprofit agencies that focus on the needs of people with disabilities, victims of domestic violence, and the economically and socially disadvantaged. For more than 100 years, AT&T has built a tradition of investing in local communities through ongoing support for education, civic and community services, the environment, public policy and the arts.

For these reasons, we respectfully urge the Commission to approve the abovementioned acquisitions and mergers as quickly as possible.

Respectfully submitted,

Daniel B. Walsh
President and CEO
The Business Council of New York State