November 7, 2006 4:00 AM PST

AT&T and BellSouth: Why you should care

Watchdog groups believe the outcome of a quiet political battle over which restrictions to impose on the AT&T and BellSouth merger will affect consumers for years to come.

When the AT&T monopoly was broken up in 1984 by antitrust regulators, it was divided into seven Bell operating companies. After this merger, there will be three companies. The new AT&T will become the nation's dominant phone company, controlling more than half the telephone and Internet access lines in the U.S.

In many ways, the new AT&T will be even stronger than the old Ma Bell because today's company competes in many more markets, including business and consumer data services and paid television. And therein lies the problem. A supersize AT&T, some worry, could have the ability to jack up wholesale line-leasing rates it charges to smaller carriers--a cost that would ultimately be passed on to consumers.

"When you create an entity that is this large, it makes future competition impossible," said Mark Cooper, research director for the Consumer Federation of America.

Certainly, such fears are tempered by the notion that the telecommunications industry has changed in the past 20 years. New phone competitors such as the cable TV operators have emerged, giving most Americans at least two choices for their broadband and phone services.

But as the cliche goes, the devil will be in the details of this $80 billion deal, which was first announced in March. Department of Justice and state regulators have already approved the merger, and the question now is what restrictions the Federal Communications Commission will place on the newly minted AT&T.

On Thursday, the five-member commission, which is split on the issue along party lines, delayed a vote on the merger. A fifth commissioner, a Republican named Robert McDowell, has a potential swing vote. But he has recused himself, because before joining the commission last June, he represented an industry group strongly opposed to the merger. Now, there's speculation that the general counsel for the FCC may instruct McDowell to un-recuse himself to break the deadlock.

"The most likely scenario is that McDowell will be asked to vote," said Blair Levin, who was chief of staff for former FCC Chairman Reed Hundt and is now a telecommunications industry analyst for Stifel, Nicolaus & Company. "And that will certainly change the negotiation and move things closer to an end game."

McDowell hasn't indicated publicly how he might vote if asked to participate, but some people believe his previous relationship with companies opposed to the merger has backed him into a corner.

"I'm quite certain he would prefer not to vote on this merger," Levin said. "But if he does vote, I'm sure there will be people on either side that criticize him for whichever way he votes."

Behind-the-scenes dominance
At first glance, the AT&T and BellSouth merger doesn't appear to affect consumers directly. The companies offer telephone and DSL service in different regions of the country. And only in a few instances do they compete head-to-head for business customers, due to last year's merger between long-distance carrier AT&T and local phone company SBC Communications.

Instead, consumers will likely feel the impact of the merger indirectly, because a combined AT&T and BellSouth will have more control over the wholesale communications market. Together, AT&T and BellSouth would control more than half the access telephone infrastructure in the United States.

Why would that be a problem? Infrastructure companies such as EarthLink must lease lines to provide competitive broadband service. Since the 1996 Telecommunications Act, the government has regulated pricing and access to this infrastructure. But over the past decade, the FCC has steadily scaled back its regulation, leaving the phone companies to negotiate unregulated commercial rates directly with their competitors.

Opponents to the merger fear that a bigger AT&T could use its newfound dominance in the wholesale access market to jack up rates, forcing out of business competitors that use its so-called local access loops. And fewer competitors would mean fewer choices for consumers, they argue.

CONTINUED: Hammering out the conditions…
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16 comments

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Its the Wireless piece
People really are missing the big picture here.
AT&T is trying to buy Bell SOuth because of Cingular (Narrowband) asset.
They could easily divest themselves of the Bell SOuth Telco piece and save everyone this hassle.

Broadband Wireless
They also are establising a position (testing)in the Broadband Wireless space with their 2.3 & 2.5Ghz spectrum. The scary part of this is that with their Narrowband Cingular position and wired DSL and FTTN ethernet services they have got to control and manage this Wireless Broadband piece to make sure it does not compete with there main line products.
In short, the FCC should make them divest themselves of any and all of the Licensed Broadband Wireless spectrums if they allow the Cingular piece to go through.

These new Metro Area Wireless Mesh networks working in todays unlicensed WiFi and near term WiMAX licensed products, which allow portable and mobile Broadband (2-10Mbps)access to ones information and entertainment, will dominate the Last Mile Data and VoiceIP services market and effectively negate the value of much of their planned DSL and Cingulars Metro market coverage. AT&T needs to make sure this does not happen or to try and minimize its impact by controlling spectrum use in their markets.

AT&T is also very concerned about Sprint and Clearwire aggressive move, with big $$$ backing into the Nationwide WiMAX (2.5Ghz) markets.


Jacomo
Posted by jacomo (115 comments )
Reply Link Flag
FTC hasn't met a monopoly it didn't like in years
The FTC abandoned its mission to prevent monopolization of markets a long time ago - i.e. ExxonMobil, for one. Free markets stopped being fair for the consumer once work was devalued in favor of investment. I appreciate what the writer is saying, and wish it might matter in our society. Unless one is a major player in the investor class, the rest of us are put here to maintain the only acceptable form of welfare left in this country.
Posted by cardinalbird2 (13 comments )
Reply Link Flag
Times Of Change
With the economy of the world, companies are always looking for acquisitions. They want to be more competitive, cut the number of employees needed, and cut costs. Companies like SBC and Bell South have had leasing rates locked into place so that other carriers could provide the same service at a lower cost. The independent carriers do not provide that same quality service as the major provider. State Corporation Commissions and the FCC provide adequate regulatory controls.
Posted by js1952 (1 comment )
Reply Link Flag
We need competitive controls
nt
Posted by qwerty75 (1164 comments )
Link Flag
Regulatory Meddling
I remember one morning this year a friend of mine in Texas (along with thousands of others) woke up to find thier cellular service had been cut because of a merger that was deemed to not be competititve enough for some regulator or the other.

A 1983 sign that hung in many Bell System facilities, "There are two giant entities at work in our country, and they both have an amazing influence on our daily lives . . . one has given us radar, sonar, stereo, teletype, the transistor, hearing aids, artificial larynxes, talking movies, and the telephone. The other has given us the Civil War, the Spanish American War, the First World War, the Second World War, the Korean War, the Vietnam War, double-digit inflation, double digit unemployment, the Great Depression, the gasoline crisis, and the Watergate fiasco. Guess which one is now trying to tell the other one how to run its business?"
Posted by Too Old For IT (351 comments )
Reply Link Flag
If you ignore a few pesky facts
1. Things improved dramatically after ma bell was broken apart.

2. It is a poor assumption that things like TV and movies have helped the country.

3. It is flat out wrong in the assertion that the US government had anything to do with starting the first or second world war, actually has a large impact on the economy(it really doesn't, they just take credit for it when things are going good), the great depression(a very strong argument that lack of banking regulations is what got that ball rolling can be made). As for watergate, just typical dirty politics, the US government didn't exactly cause it, rather then rogue elements did.

Anyway, quoting what basically amounts to a bumper sticker that expresses the interests of a monopolistic beast isn't exactly making a valid point.
Posted by qwerty75 (1164 comments )
Link Flag
The new bigger Ma Bell
Isn't anyone else old enough to remember that a sixty minute phone call from Missouri to California cost $40 in 1972? That's the pricing a monoply creates. Today we can buy unlimited phone service for $35 per MONTH. AT&T and Bell South merging would recreate such a monopoly, and prices would go through the roof again. Competition is good people.
Posted by redbob1 (1 comment )
Reply Link Flag
Re: The new bigger Ma Bell
> Isn't anyone else old enough to remember that a
> sixty minute phone call from Missouri to
> California cost $40 in 1972? That's the pricing
> a monoply creates.

Agreed that this merger would be ominous for citizens and competition, although there's a bit more to it than that.

It's vastly cheaper to operate a voice network today than it was in the '70s, because:

A) the infrastructure is all in place and paid for
B) the equipment is much cheaper now
C) The cost to lease access is much cheaper from other carriers for various reasons. (one of them is "competition", but competition ain't what it used to be, in the George II era)

This merger wouldn't re-create a "monopoly", although it might be close to a "duopoly". (ie ATT and Verizon owning ~90% of US last-mile telecom infrastructure)

That would certainly be a big problem for competition, and should be opposed for the sake of choice and competition.

But since George II has stacked the agencies meant to protect citizens from market abuse (ie FCC, FTC, etc.) with his pro-business cronies, they will continue to make decisions that favor the big-business interests, and as another poster said, the current FCC hasn't met a monopoly it didn't like in years.

That has to change. Otherwise, pretty soon the only companies people will be able to buy internet access from will be:

- Phone company (ATT or Verizon)
- Cable company
- Power Utility


What a lovely list of "good guys". I'm not at all happy about them handling all my voice and data traffic, just so they can hand it over to the NSA..

<a class="jive-link-external" href="http://www.eff.org/legal/cases/att/" target="_newWindow">http://www.eff.org/legal/cases/att/</a>
Posted by pjk0 (1198 comments )
Link Flag
Many people are old enough
but choose to ignore it.

Corporate America has done a tremendous job convincing people that the interests of corporations supersede the rights of the people.

It has gotten so bad that many people believe that questioning the corporate agenda is tantamount to treason.

It is one of the reasons so many who don't know what is going on support Microsoft and stupid moves like this.
Posted by qwerty75 (1164 comments )
Link Flag
If I remember correctly&
When Ma Bell was broken up prices when up big time and slowly
started to come down. Also that $35 per month only applies to cell
phones, I don't know of any land line carriers that will allow you to
call long distance for a flat monthly rate without taking into
account how much you talk. Also that $35 a month is normally a
limited number of minutes the unlimited comes into play only when
your calling mobile to mobile within their network.
Posted by jones_8099 (177 comments )
Link Flag
thats the FTC not the FCC
FTC approves everything since clinton era.
But this is the FCC.

The FCC has been on a wild goose chase for power outside its jurisdiction the last 10 years. Obviously FCC will sucumb to ATT, they are just trying to get all the media coverage while they can.
Posted by Scopip (76 comments )
Reply Link Flag
Not Caring COSTS!
Suppose I told you that a lack of consumer caring regarding Cable industry monopolies and unwarranted FCC "protective orders" cost consumers and business over 200 Billion dollars (that's Billions with a Big "B" folks)! over the last 20 years. Would you speculate that that might be reason enough to care?
Well, we're faced with a similar situation with the AT&#38;T/Bell South merger.
By allowing the creation of a virtual monopoly with this merger( well over 50% market share in many areas, up to 90%+ in some areas), the FCC would recreate the disastrous monopoly control of infrastructure that political considerations ( and contributions) allowed with Cable.
Although unrelated to communications, have we all forgotten the 125 Billions plus/plus (that's Billions with a Big "B" folks)! that Savings and Loan Dereg cost taxpayers? Those costs specifically because of the politically-driven lack of oversight and nonexistent statutory requirements to "play nice" and not cheat consumers.
Utility Dereg? Headed the same way, evidence of wholesale corruption and regulatory mismanagement starting to surface-you ain't seen nothin' yet!
So let's forego putting our heads in the sand one more time; understand the issue of monopoly market share and infrastructure control, evidenced by lack of competitive access to infrastructure not being mandated at reasonable rates.
Does anybody really think that AT&#38;T and Bell South haven't recovered their infrastructure costs? Same with Cable.
And, the economic "costs" of infrastructure are "FLEXIBLE" even NEGOTIABLE, DEPENDING ON HOW MUCH THE TELCOS AND CABLE CAN GET REGULATORS TO "BEND OVER" IN TERMS OF HOW TO EVEN ARRIVE AT A "COST" STRUCTURE, MUCH LESS HOW TO DEPRECIATE SAID COST, AND ARRIVE AT "REASONABLE" ACCESS RATES FOR COMPETITIVE SERVICE PROVIDERS.
If nothing else, require the FCC to mandate a continuing level of oversight regarding reasonably priced Competitive Access.
Otherwise we'll be giving away another 200 Billion dollars (that's Billions with a Big "B" folks)! in just the next 10-15 years, and won't even have been "kissed" for our trouble.
Although considering where the Telco and Cable mouths have been, I'm sure not interested in their kisses.
DIOGENES
Posted by bdennis410 (175 comments )
Reply Link Flag
Why would that be a problem?
Why would that be a problem? Infrastructure companies such as EarthLink must lease lines or swithch to satellite internet <a class="jive-link-external" href="http://www.highspeedsat.com/idirect-internet.htm" target="_newWindow">http://www.highspeedsat.com/idirect-internet.htm</a> to provide competitive broadband service. Since the 1996 Telecommunications Act, the government has regulated pricing and access to this infrastructure. But over the past decade, the FCC has steadily scaled back its regulation, leaving the phone companies to negotiate unregulated commercial rates directly with their competitors.
Posted by electronino (15 comments )
Reply Link Flag
What Has Changed
None of the rationale for the original breakup of Ma Bell has "gone away". Why allow another super-merger that sets up even worse conditions? That is not even rational thinking. There must be some major kickbacks to follow.
Posted by Jenny3426 (10 comments )
Reply Link Flag
 

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