3.06.2006 | Merger Mania: AT&T's bid for Bell South
Wow. We've come a long way from the Telecommunications Act of 1996, which was designed to increase competition between local and long-distance telephone providers. Here is a list of the major companies that existed then:
- Bell Atlantic
- Southwestern Bell (SBC)
- Pacific Telesis
- Bell South
- U.S. West (Qwest)
Now, Bell Atlantic, NYNEX and GTE are Verizon.
Pacific Tel, Ameritech and Southwestern Bell, once merged to form SBC, are now part of "the new AT&T" since SBC acquired AT&T within the last few months. Verizon has acquired MCI as well. The point of the 1996 act was to foster competition between long-distance and local companies for each others' access, but now they have merged.
Why? A regulatory ruling by the Bush administration's Federal Communications Commissions ruled that local companies no longer had to lease their lines to competitors at reduced rates; a key measure of the 1996 act that made competition possible. After this ruling was issued, AT&T exited the local telephone market, and the merger between SBC and AT&T happened. It's interesting because these companies were once mortal enemies – SBC arguing for higher line lease rates and AT&T joining a coalition called Voices for Choices that argued for the 1996 subsidies. A television advertising battle in the nation's capital ensued. But now that the merger is closed, voicesforchocies.com is most certainly offline.
The only untouched companies are Qwest and Bell South, companies with a strong regional interest. No longer.
SBC, the new AT&T, has made a $67 billion bid to acquire Bell South. The country's local telephone companies would go from four to three. Also interesting is how Cingular is involved, as it was a joint venture between Bell South and SBC, but would now become part of the new AT&T. AT&T Wireless, a spinoff of the old AT&T, was just acquired by Cingular last year.
Where does this leave the consumer? Well, it does leave Qwest as the country's only independent local telephone provider. But competition from cable, and perhaps power companies in the future, may make telephone competition a thing of the past as companies act to consolidate infrastructure. As one Associated Press article put it, it's one step away from recreating the "Ma Bell" monopoly of the 1980s.
I don't know what to think. I know I do like the idea of SBC and Bell South coming together to provide Cingular wireless services under the AT&T brand. But I wonder what the prognosis is for long-term communications competition, especially since it seems the mergers are far from over. If Bell South can be bought, it's just going to be a question of who will pay for Qwest – it already sold of its wireless assets to Verizon within the past year or so. We'll be left with only two regional providers – AT&T and Verizon. How can that be good for the consumer?