The bell tolls for long distance

Long distance is dead.

The last of the big-three long-distance carriers, MCI Inc., yesterday agreed to a $6.7 billion takeover by Verizon Communications Inc. The move comes two weeks after AT&T Corp. agreed to sell out for $16 billion to SBC Communications Inc. Meanwhile, Sprint Corp. is taking a hard turn into a chiefly wireless future through a planned $36 billion merger with Nextel Communications Inc.

While MCI and AT&T are best known to most Americans as providers of interstate phone service, in both deals, the consumer long-distance business was not the valuable property.

Between fixed-price local-national packages from wireless carriers, Baby Bells, and cable companies, and alternatives to conventional long distance like e-mail and Internet telephone service, long-distance phone service as a stand-alone operation has gone into a terminal decline.

Instead, what Verizon and SBC overwhelmingly want for their billions are chiefly a select group of big-spending business and government telecom accounts that they can't yet woo from MCI and AT&T. They also want Internet data networks reaching across the earth to sell advanced services to their existing local business customers in cities like Boston, New York, Chicago, and Los Angeles.

The roughly 35 million remaining long-distance customers at MCI and AT&T have, who generate less than one-quarter of each company's revenues, may actually be hurdles to getting deals approved. To allay antitrust concerns, many analysts say, Verizon and SBC are likely to have to divest customers of the long-distance company they are acquiring in states where they provide local service -- for example, MCI customers in Verizon-dominated Massachusetts, AT&T customers in SBC's Connecticut.

But it's unclear who would actually want to buy them.

''One of the things the MCI-Verizon and AT&T-SBC deals shows is that the whole concept of 'long distance' is an irrelevant one," said Jonathan Hurd, a vice president of Boston telecommunications consulting group Adventis. ''These deals are being done primarily for the business market."

Verizon chief executive Ivan G. Seidenberg, in public statements yesterday, was clearly not impressed with MCI's traditional long-distance business as an asset.

''We agree that the voice business and the old traditional telephony businesses are shrinking," Seidenberg said. ''The consumer long-distance business is being impacted more by wireless and the Internet than it is by MCI and Verizon competing in the marketplace. When we combine our consumer long-distance piece, we are still facing the enormous onslaught of technology that comes from wireless and the Internet and text messaging and anything else that you would want to talk about."

Verizon expects to reap $7 billion in savings over several years by merging its operations and network with MCI, which will include laying off about 7,000 MCI workers. It has made no decisions about using the MCI name.

Ten or 20 years ago, it would have been hard to imagine regional companies then known by names like New England Telephone and Southwestern Bell rising up to take over AT&T and MCI.

But as long-distance has imploded and the Bells have made a huge and successful push into wireless, they now dwarf the industry's former giants. Verizon is using barely 6 percent of its stock-market capitalization to acquire MCI. Today's SBC is five times the value of AT&T.

With President Bush heading into a second term and Republicans in charge at the Federal Communications Commission and Justice Department, both deals are expected to sail through regulatory approvals, despite opposition from consumer advocates.

''These mergers might satisfy Wall Street, but they will hurt Main Street," said Janee Briesemeister, senior policy analyst at Consumers Union, publisher of Consumer Reports. Assuming the deals go through, Verizon and SBC will now either be first or second in the wireless, local, and long-distance phone markets.

AT&T and MCI had tried to attract customers from the Bell carriers with combination local-long-distance packages like MCI's ''The Neighborhood." However, these plans depended on low-cost, regulated prices for renting Bell phone lines for local service that have been undercut by recent FCC and court rulings, and last year both companies began abandoning local service and the consumer market generally.

US Representative Edward J. Markey of Malden, the ranking Democrat on the House telecommunications subcommittee, faulted the FCC for ''a series of decisions which closed the door on the long-distance industry's ability to compete in the local residential telecommunications marketplace. The FCC's decisions are predictably causing companies to merge and will result in fewer competitors in the marketplace, and that's bad news for consumers, high-tech workers, manufacturers, and the prospects for further innovation."

Three years ago, when MCI was trying to emerge from bankruptcy protection after an $11 billion accounting scandal, Verizon demanded that the government liquidate the company as punishment for its massive frauds. Seidenberg, for example, argued that letting MCI emerge from Chapter 11 as a renewed competitor carrying $30 billion less debt would be nothing short of a verdict that ''crime pays."

But yesterday, Verizon spokesman Jack Hoey said: ''MCI has done an excellent job of separating itself from the past and is now reorganized and operating under new management. Verizon believed that in the past we were the victim of WorldCom's pervasive and fraudulent behavior, but that does not involve the current business or its employees. We believe MCI has done a remarkable job of turning around."

Peter J. Howe can be reached at howe@globe.com.