March 6, 2006 1:03 PM PST

What does the AT&T-BellSouth merger mean for consumers?

Only three months after it closed the merger of AT&T and SBC Communications, the new AT&T is opening its checkbook again to buy BellSouth for a whopping $67 billion. So what's this megamerger mean for consumers?

Initially, consumers are not likely to even notice the merger, which is expected to close within the next year. For one, AT&T, which is still busy integrating business units and networks from its last merger, will also take time to make all the logistical changes associated with a merger of this size.

Another reason consumers likely won't feel the impact right away is that the two companies don't directly compete with each other, except in some business accounts. AT&T provides local telephone service and broadband in 13 states in the western and southwestern parts of the United States, whereas BellSouth provides those services in nine states in the Southeast. The two companies also jointly own Cingular Wireless, so other than a name change, the service isn't expected to be affected.

But taking a longer-term view, consumers could see several changes. While the companies believe the merger will allow AT&T to roll out new services more quickly, consumer groups worry that a bigger AT&T will hurt competition by putting an even tighter squeeze on companies such as Vonage, which uses broadband networks to provide services like IP telephony to consumers.

"Consumers won't actually begin to see any real change in services for at least two to three years," said Charles Golvin, an analyst with Forrester Research. "Eventually, an integrated company could introduce new services more quickly. But there is a risk that a bigger AT&T could move slower."

The wireless advantage
The most immediate and obvious benefits of the merger will likely impact wireless customers. Wireless is one of the fastest-growing parts of AT&T, which owns 60 percent of Cingular Wireless. By taking full control of the company, executives at AT&T believe they will be able to use the revenue growth and the savings it will get by consolidating certain functions, such as marketing, to invest in new technologies and expand its business.

"(This merger) will improve our growth profile with increased exposure to wireless," AT&T Chief Executive Edward Whitacre said during a conference call with analysts and investors on Monday. "And it will create a strong national and global competitor better positioned to innovate and deliver new services to both businesses and consumers."

For example, AT&T could develop a new service that allows people talking on dual-mode wireless phones to use the cellular network when they are outside their home or office, but then switch over to a broadband IP network when they are making a call where they can receive a Wi-Fi signal.

Not only does this give more options to customers, it allows AT&T to better manage usage on its network. Sprint Nextel touted this potential service when it announced a development relationship with four cable companies last year.

Exploiting the alliance
Other advanced communications services, such as a single voice mail service for wireless and landline phones, could be introduced. Video services could also be linked to cell phones.

AT&T and BellSouth are also closely aligned when it comes to their wireline broadband strategies, which could mean speedier IPTV deployments for BellSouth customers. The main reason for this is that the companies have built their networks around a similar architecture.

Unlike Verizon Communications, which is spending billions of dollars to extend fiber optics directly to consumers' homes, AT&T and BellSouth have extended their fiber networks only into neighborhoods. Then they use existing copper lines to offer broadband service using new ADSL technology, which allows them to increase download and upload speeds into the home.

AT&T's project Light Speed, which provides TV service over broadband connections, is already being tested in San Antonio, Texas and is planned for wider deployment within the original AT&T footprint later this year. The similarities in the basic broadband architecture should make it easier for AT&T to extend its next-generation broadband services, such as Internet Protocol TV, into the BellSouth region.

"BellSouth customers could eventually see IPTV much faster through AT&T than they ever would have with BellSouth," said Golvin.

But a merged AT&T and BellSouth may also stifle competition and actually slow down innovation, according to consumer groups such as the Consumers Union and Consumer Federation of America. These groups said they would ask the Justice Department's antitrust division to reject the merger. Critics of the merger fear that a bigger and stronger AT&T would have too much influence in the overall market.

For example, AT&T has already said that it would like to limit or tier services so that Internet companies such as Google or Vonage, which use broadband to deliver services to customers, would pay a fee for using the AT&T access network to reach customers. The topic has been hotly debated on Capital Hill and is likely to be a hot-button issue when and if Congress rewrites the Telecommunications Act. AT&T's CEO, Ed Whitacre, has said publicly that companies that use the AT&T broadband network should not be given a "free ride."

"Merging with BellSouth would give AT&T that much greater market power and command over access networks," said Jay Pultz, a vice president at Gartner. "So I think it's a legitimate concern, considering that AT&T is already leaning toward premium pricing for companies that use their broadband networks to reach customers."

See more CNET content tagged:
BellSouth Corp., merger, AT&T Corp., broadband, Cingular Wireless

13 comments

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Ah th no bell prize
So all the little bells, have finally reunited into one big bad bell, that can do what it wants when it wants!

Chicken george jnr the draft evader, has finally killed the sherman act, and monopoly is the rule of GOP, rather than the exception!

Next on the agenda, will be the reformation of Standard Oil from the remaining sisters!

Such is life, where the end user, is required to pay all corporate bills , seven times over, and after that it is the interest, and finally the unseen zero extras!
Posted by heystoopid (691 comments )
Reply Link Flag
not a problem
We are no longer talking about the days were physical copper going into a home represented a natural monopoly. Between VIOP and wireless traditional voice service is in major decline. AT&T would still face very stiff competition from the cable operation. For high speed internet there are multiple options available including cable, WIMAX, EVOD, satellite, ect. Its time to get out the markets way and let it do its job!

-Paul
Posted by p.shearer (60 comments )
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One small problem
Question who provides the backbone to the system!, for all this to function, from copper, to fibreoptics to the very satellites we use!

Guess who?
Posted by heystoopid (691 comments )
Link Flag
It's a scandal
www.teletruth.org

The networks have already been paid for.
Posted by ordaj (338 comments )
Link Flag
Scary
Charging for Google? What next? Could this be the end of unlimited Internet as we know it? Federal regulators need to make a condition against this sort of arrangement if this merger is allowed to go through. If we are going to be having to rely on ever-fewer, ever-larger telecom companies for our Internet access, who will presumably want to charge ever-higher fees, we shouldn't have to be beholden to them for access to basic Internet services.
Posted by omaryak (59 comments )
Reply Link Flag
If history is any indication...
Before it merged with AT&T, SBC was fighting against regulations that forced it to lease its landline phone lines to competitors as a stipulation of the 1996 Telecommunications Act. It won, AT&T had to leave the local phone business, and the two companies have merged. It seems like the next step in the evil plot is to monopolize not just telephone access but Internet access as well. I hope Congress and the people reject this kind of draconian profiteering.
Posted by omaryak (59 comments )
Link Flag
A big problem
As one Assoicated Press article put it, this merger is "one step away" from rebuilding the old AT&T monopoly of the 1980s. There is competition from other services, but wireless services aren't likely to compete in urban areas where landline services are already widely available. Cable is already a monopoly and already charges more than its DSL counterparts. Between DSL and cable, are we willing to live with only two options for accessing the Internet? And did you read the article? AT&T is making a push to charge Internet companies like Google and Vonage for access to its lines. Absolute power corrupts absolutely. If we get completely out of the market's way, it hurst the consumer. That's why we need the government and antitrust laws to intervene on the consumer's behalf. I don't mind AT&T and Bell South coming together  the merger makes logical sense. But the consumer is being faced with ever fewer choices for accessing the Internet, and AT&T is wanting to charge companies for using the Internet beyond what they already pay in access fees. It seems greed might be too much of a factor here, especially given that SBC (as the new AT&T was previously known) fought against leasing its landline phone lines to competitors at discount rates, a stipulation of the 1996 Telecommunications Act that was supposed to ensure local telephone competition. Instead, AT&T is getting exclusive control over local lines in nearly half the states in the union, and it wants to charge more than it does now. That prospect should be scary to the average consumer.
Posted by omaryak (59 comments )
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Is there any rational person out there....
... who has any expectation that telephone bills will go down?????

By the way, notice how well the deals are staying away from Qwest.
Qwest in the one AT&T remnant that has turned into a financial
disaster waiting for the final blow-up. Qwest management is a
massive collection of losers - except in terms of the bonuses they
award themselves.
Posted by Earl Benser (4310 comments )
Reply Link Flag
Is there any rational person out there....
... who has any expectation that telephone bills will go down?????

By the way, notice how well the deals are staying away from
Qwest??? Qwest in the one AT&T remnant that has turned into a
financial disaster waiting for the final blow-up. Qwest management
is a massive collection of losers - except in terms of the bonuses
they award themselves.
Posted by Earl Benser (4310 comments )
Reply Link Flag
BellSouth is Irrelevant
Does anyone still use phone services from a traditional telco? I dumped BellSouth years ago in favor of VOIP - this cut my phone bills by more than half. I have more features and less cost - only two wires come into my house Broadband and Power. When are these guys going to wake up and realize that we don't need them anymore?

Consumers have real choice today - I vote my dollars for VOIP. We all need to send a strong signal to these guys - get competitive or go away!
Posted by wsdowns (6 comments )
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Perhaps where you live..
Perhaps where you live, but where I live you can either get bellsouth dsl (w/a landline), or get cable (and VOIP), there is nothing else and direcway is not an option.
Posted by pmfjoe (196 comments )
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Qwest
Qwest will probably be absorbed by either Verizon or AT&T
Posted by PaulnOKC (7 comments )
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AT&T Cingular Stinks
My AT&T cell service has steadily degraded since they prostituted themselves off to Cingular. Now they decided that they were going to further penalize me for their crappy service by charging me an extra $4.99 a month (TDMA Analog Chg). I then cancelled my Cingular service after transferring to T-mobile. Cingular had the further gaul to charge me for the entire next month's service. When I called to complain, they basically said, "Go to hell, we can do this, it's in the fine print." Well I say to Ed Whitacre, "You go to hell. Burn in hell for eternity you greedy bastard."
Posted by maxwis (141 comments )
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