RealTime IT News

For Whom the Bells Toll

WASHINGTON -- News of the blockbuster AT&T-BellSouth merger that would combine the nation's first and third largest telecommunications firms is drawing bipartisan yawns inside the Beltway.

Having just recently approved the mergers of SBC-AT&T, Verizon-MCI and Sprint-Nextel -- with remarkable speed and a feathery regulatory touch -- neither the Bush administration nor Congress is likely to break a sweat over this one.

It's not the Republicans' way or, for that matter, the Democrats', in the free-market Washington of today.

Mergers? Get over it, they happen. Higher prices? Maybe. Or, maybe not. Trust the market, baby. Who knows?

Since the Bush Department of Justice (DoJ) abandoned the opinion of Bill Clinton's DoJ that Microsoft should be broken up, antitrust fervor in Washington has disappeared.

Sen. Daniel Inouye, the Democratic doyen of the Senate Commerce Committee, did somberly remind his colleagues the merger deserves "careful and exacting review," but allowed that the whole thing "is not unexpected given the changing nature of the communications marketplace."

House Commerce Committee Chairman Joe Barton (R-Texas) said Wednesday there "might" be some hearings but, overall, he didn't see any red flags attached to the proposed merger.

About the only folks on Capitol Hill really yapping about the $67 billion stock deal are consumer groups.

Locked in a 20th-century steel cage death match with the Bells over local phone rates, the Consumers Union and the Consumer Federation of America (CFA) simply refuse to believe anything good can come of the merger.

Maybe nothing will, but it'll hardly hurt competition in the broadband market, which is the central question that the DoJ and the Federal Communications Commission must decide.

According to the latest numbers from the Telecommunications Industry Association (TIA), there are 22.5 million Americans using cable modems with another 17 million connected to the Internet through DSL.

The Bells, though, are surging. For the first time, more new broadband subscribers signed up for DSL than for cable Internet service in 2005.

"The fiction that a lot of competition will protect the public is dead," Mark Cooper, director of consumer research for the CFA, curiously told internetnews.com earlier this week.

Just exactly how are two competitors instead of one for consumer broadband service bad for the public? Three competitors, of course, would be better than two, but that's coming also in the form of wireless, satellite and power-line broadband.

"We've gone from a regulated monopoly to an unregulated duopoly," Cooper said.

Twenty years ago, wasn't the goal of breaking up the original AT&T to bring more competition to the market?

Back then, there was the American Telephone & Telegraph (AT&T) Company, the venerable government-approved and regulated local and long-distance telephone service monopoly widely known as Ma Bell.

The old lady, suffering from acute divestiture, died in 1984, leaving behind her Regional Bell Operating Companies (RBOCs): Nynex, Bell Atlantic, BellSouth, Southwestern Bell, US West, Pacific Telesis and Ameritech.

The Baby Bells immediately began eating each other in a series of mergers to meet the challenge of cable companies such as Comcast and Time Warner, which offered consumers packages of voice, video and data.

Cable prices, however, stayed high until the surviving sons of the Bells could roll out DSL service packaged with local and long-distance calling plans. The Bells now plan to offer a competitive pay television service to the cable using IP -- IPTV.

So the cable industry is going after the Bells' traditional telephone business by using technology, such as Voice over IP to lower prices. The Bells, in turn, are targeting cable television customers with an IPTV package that costs less than cable.

This is known as competition.

Perhaps the consumers didn't get the memo from Verizon political swami Tom Tauke, who once famously defended the Baby Bells' refusal to share their new, glossy, fiber-optic high-speed lines at discounted rates with competitors as "Old lines, old rules. New lines, new rules."

In Washington, lawmakers and regulators certainly got it.