Recreating a Monopoly

at&t_consumes_bellsouth
Remember the old Ma Bell, AT&T? Before the 1980s we pretty much all had the same phone company and one long distance company with pretty high rates. You could only get your phone from the phone company, and this monopoly was protected by the federal government.

That looks like the current dream of the new AT&T–formerly SBC–except for the part where the protected monopoly had public service obligations.

According to today’s New York Times, AT&T is close to sealing a deal to buy BellSouth, one of the last four remaining regional telephone companies in the US:

AT&T is expected to pay about $65 billion for BellSouth, the country’s third largest phone company, which operates in a nine-state region in the Southeast. The price represents a 25 percent to 30 percent premium for BellSouth shareholders.

The combined company would have more than $125 billion in sales, 70 million local-line phone customers and nearly 10 million broadband subscribers.

Like nature abhors a vaccuum, a capitalist abhors actual competition, and the voracious apetite of SBC/AT&T is strong evidence for that. If regulators let AT&T roll over them and approve this deal, it won’t be long before the nation’s largest telecom behemoth will be licking its lips over Verizon or Qwest, plotting a nationwide fiefdom.

Usa_telecom_merger_mapThis threat will probably just spur more consolidation across telephone and cable, such as forcing Comcast to link up with Verizon. The result likely will be even fewer companies controlling all of television, data and telecommuncations services, consolidated across industries, carving up the country into territories each with a communications monopoly.

And yet, this is the same AT&T that keeps crying that it can’t afford to roll out high-bandwidth broadband internet without charging content providers or giving preference to the company’s own content. Yet, even after the expensive merger, the combined SBC/AT&T saw a net income of $4.7 billion last year [link to PDF earnings statement].

So AT&T has plenty of cash on hand to go on a $65 billion spending spree, but it doesn’t have the capital to provide the level of broadband service it’s been promising since 1996?

In a press release, the Center for Digital Democracy’s Jeff Chester draws a direct connection between the planned AT&T-Bell South deal and the FCC’s effective deregulation of internet services:

This proposed merger is the direct result of a recent FCC decision that eliminated long-standing safeguards for the Internet. AT&T can now operate its broadband platform (as well as its new digital TV service) as a privately controlled highway. Instead of the Internet reflecting what the federal courts not long ago called “the most participatory form of mass speech yet developed,” it’s now threatened to be reduced to what AT&T called its private “pipes.”

The big telephone companies argue that if they can’t charge content providers to reach subscribers’ internet connections then they’ll have to raise rates for consumers. I bet rates will go up regardless, to help finance these acquisitions, which will allow them to eliminate competition, thereby eliminating any pressure or incentive not to raise rates.

The doesn’t have to happen, but it will if we just lie back and watch the binge.

4 Responses to Recreating a Monopoly

  1. George March 5, 2006 at 3:23 pm #

    “So AT&T has plenty of cash on hand to go on a $65 billion spending spree, but it doesn’t have the capital to provide the level of broadband service it’s been promising since 1996?”

    I think you’re confusing two very different actions. Buying a profit making company is very different from making capital investment.

    “I bet rates will go up regardless, to help finance these acquisitions…”

    Once again, two different functions. They don’t need to increase rates to finance acquisition. The income the acquiition provides will finance it alone.

    “…which will allow them to eliminate competition, thereby eliminating any pressure or incentive not to raise rates.”

    The government will never allow things to go back to the way it was with only one phone company. BellSouth and SBC (which bought AT&T) weren’t actually competitors. They had specific territories. Their competitors are companies like Comcast. AT&T can now provide broadband, but it is competing against other broadband providers, of which Comcast is one.

    It’s been my experience that when acquisitions like this happen, it leads to the creation of new competitors that provide cut-rate services. I predict that’s what you will see next. The big will get big, and the public will seek someone who can provide cheaper and better service.

    “The doesn’t have to happen, but it will if we just lie back and watch the binge.”

    The Justice Department is run by career civil servants who aren’t subject to political pressure. They’re also not subject to lobbying groups. The law is blind. If this merger doesn’t break any laws, it will be approved, no matter what you do.

  2. George March 5, 2006 at 3:35 pm #

    http://www.sbc.com/gen/press-room?pid=4800&cdvn=news&newsarticleid=22140

    Since AT&T and BellSouth are not actual competitors in the local, long distance and video markets, and because BellSouth is not a significant competitor with AT&T in the enterprise market, the merger will not reduce competition in any of those markets.

Trackbacks/Pingbacks

  1. infobong.com » links for 2006-03-06 - March 6, 2006

    […] mediageek » Recreating a Monopoly Paul’s perspective on the imminent merger of AT&T (nee SBC) and RBOC Bell South. (tags: telecom politicaleconomy) […]

  2. mediageek » This Blog Could Terminate My DSL - October 1, 2007

    […] Yes, it’s overbroad, overly vague, and therefore probably too difficult to enforce across the board. Nevertheless these terms give the company a good excuse if it wants to go after some overly critical blogger who also happens to be a customer. And, yes, I am an AT&T customer, so I wonder if some company hack will go through my archives of less-than-flattering comment about its former incarnation as SBC, or my critical words about its merger with BellSouth. […]

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