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by If you haven't been following the news lately, telecom giant AT&T announced on Monday they would acquire a long-lost sibling, BellSouth, for $67 billion. This is presumably to bring Cingular fully under their control, the joint venture wireless phone company split 60:40 between AT&T and BellSouth respectively. While investors have many reasons to be concerned, others are worried about the effect the merger could have on 'net neutrality'. Regardless, it seems that the deal will go through.
This announcement comes after SBC Communications Inc. bought out AT&T last year to form the current AT&T. Apparently, the name of AT&T itself is a huge draw. Verizon Communications, which competes against Cingular in the wireless business has not been idle either as it has signaled interest in buying out the stake its partner, Vodaphone Group, has in their joint venture of Verizon Wireless.
Incidentally, the announced merger now puts four of the seven old 'Regional Bell Operating Companies' split in 1984 together with the new AT&T. Verizon Communications itself contains two of the old seven, while Qwest rounds out the total. As these companies slowly reunite, who is the big winner? The companies, or the consumers? If 'Ma Bell' was broken up for a reason, what are the implications as she reforms?
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No Return of Ma Bell by rvincent :: NR0 :: on 13 March 2006
"Ma Bell" or the Bell System is not being reformed. It is understandable why many -- and especially those in the media -- jump to this headline-friendly conclusion. But it is not a reflection of reality.
The old Bell System was indeed broken up for a reason. It is worth remembering, however, that the Bell monopoly was a creation of both the old AT&T (a completely different entity than the company that currently operates under that name) and of the government, i.e. the 1934 Communications Act and the FCC regulations that flowed from it. It was a partnership: AT&T convinced the government there was a "natural monopoly" in telephony; the government agreed and enacted regulations under which that monopoly grew and prospered (which, strangely enough, is usually what happens when competition is outlawed). Then in 1984, the partnership soured, and the federal government broke up the monopoly that it had supported all those years.
Anyway, the point of all this boring history is that analyzing the current transaction in terms of the 1984 environment makes no sense. The old AT&T did not become the Ma Bell monopoly by itself; it did so under a statutory and regulatory framework that, mercifully, no longer exists (for the most part). Further, the antitrust break-up of Ma Bell did not unleash a torrent of competition in telephone service; what it did was create seven local telephone monopolies and one long-distance company (AT&T). And excluding some long-distance competition between AT&T and companies like MCI and Sprint, there was really very little telecommunications competition -- none at the local level -- until passage of the 1996 Telecommunications Act.
The bottom line is, even with mergers between former elements of the Bell System, there is vastly more competition today than there ever was during the period after the 1984 break up of AT&T. Regular telephone service is no longer even profitable. And there are many new players in the game. Rest easy; the Ma Bell bogeyman is not about to reappear.