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Level 3 – Global Crossing likely bad for consumers

If Level 3 buys Global Crossing, it will significantly reduce competition in the North American Internet backbone. Today, we have a duopoly in fixed access, an ever tightening oligopoly in mobile Internet access, and a near monopoly in “middle mile” connectivity, but we still have real competition in most of the Internet backbone. This merger will move the backbone towards it’s own oligopoly.

Back in the 1990s, Qwest built a major fiber network across the US, Canada and Mexico. When completed (in December 1999) that network had 18,500 route miles in the US and 4,300 route miles in Canada and Mexico. Most of the cables in this network have 96 strands but 48 of those strands ended up under a long term lease to Frontier, a company which was later purchased by Global Crossing. In addition, Level 3 obtained 24 strands in the Qwest network. Now those ownership positions are coming together. This is not encouraging!

It will be good for Wall Street as fewer players will mean higher prices, thus giving the combined company a better chance of paying off on it’s bonds, but it’s bad news for US businesses and, in the end, for US consumers.