The Motley Fool Discussion Boards

Previous Page

Stocks M / Metromedia Fiber Network


Subject:  Acquisition conjecturing Date:  10/21/1999  12:05 AM
Author:  flergum Number:  353 of 2302

Found this on today - they are speculating what has been voiced over and over on the eboards. Makes WCG and MFNX more attractive - no?

Long Distance for RBOCs
In contrast to the Miami-Dade story, which seems to have been given too much importance, the New York Regulatory agency's letter of approval for Bell Atlantic's (BEL) entry into long distance service has gotten far too little attention.

As part of the divestiture of AT&T in 1983, the regional bell operating companies (RBOCs), were prohibited from offering long distance service, in competition with AT&T. The telecommunications Act of 1996 established a set of rules, under which the RBOCs would be allowed to offer long distance service.

There are 14 of these rules, but the most restrictive is the one requiring the RBOCs to offer competitive local telephone service, using the RBOC system.

In other words, when the RBOCs open up the existing local telephone system to competitors, then RBOCs will be allowed to have access to the long distance network.

On Monday, the state regulators in New York filed a letter with the FCC stating Bell Atlantic had met all 14 rules in the New York operating area, and should therefore, be allowed to begin providing long distance service.

Suddenly, Bell Atlantic's $1.7 billion investment in MetroMedia Fiber Networks (MFNX) makes a lot more sense. Bell Atlantic is preparing to become a long distance provider of voice and data.

This is perhaps the most important single issue in the telecommunications world, yet, it seems to be getting little play.

The RBOCs are some of the most profitable companies in America. While high growth companies like MCI/WorldCom and Sprint have done a great job building their business, they have only had one monster to fight: AT&T. Throw RBOCs into the mix, and everything changes.

Investment implications if the RBOCs offer long distance?

The value of existing long distance franchises becomes lower. Hurt: AT&T, Worldcom.
Small long distance providers, like the Williams/Winstar combination, become acquisition targets.
Fiber networks, like Global Crossing, Level 3, MetroMedia Fiber, and Qwest become acquisition targets.
The value behind this is being a full service provider of voice and data to large businesses.

The proposition would be something like:

"Hire us, and we connect every facility in the country, and all of your networked computers over our system. You get secure data transmissions, and custom rates, since we can make office-to-office calls entirely over our system, rather than taping into someone else."

It is a powerful sales message to businesses, and is currently only made on a small scale by companies like Williams and Winstar in combination.

The RBOCs have pleaded with the FCC for the right to offer long distance in the past, with little signs of hope. But the merger of MCI/WorldCom and Spring makes long distance a two-player world. This may hasten the sentiment of regulators to let the RBOCs compete in long distance.

Bell Atlantic's filing with the FCC for permission to offer long distance will, if approved, instantly change the landscape of telecom. RBOCs may suddenly become great growth vehicles.

This one had "too little" coverage.

Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us