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August 16, 2006
For the last time, the Bell System is not coming back
Consumer activists in Georgia are pressing the state Public Service Commission to block or attach conditions to the pending merger between AT&T and BellSouth. No doubt there’s a bit of home team support here—BellSouth is based in Atlanta and is a major Georgia employer. Still, commissions in 18 other states have approved the acquisition without conditions, and we hope Georgia sees it that way, too.
Objections can be seen in an op-ed by Jenette Foreman, a steering committee member of Southern Media Justice Coalition, and in an editorial in the Macon (Ga.) Telegraph (fee for use).
Both claim the merger means an end to competition and the re-emergence of the old AT&T monopoly that was dismantled in 1984.
Opponents forget that at the time of its break-up, AT&T not only monopolized local and long distance phone service, it monopolized the entire supply chain. Aside from an odd component or line card, Western Electric manufactured everything that went into the network.
Today’s AT&T buys from a wide variety of suppliers, including Georgia’s own Scientific-Atlanta (which is part of Cisco Systems, another major vendor to the industry). Scientific-Atlanta employs 7,700 people. As part of a $195-million contract announced last year, Scientific-Atlanta is building the innovative IP set top boxes used with AT&T’s IP video service, which the company will likely expand into the BellSouth region after merger is complete. That means more business for Scientific-Atlanta and its suppliers and more video options for Georgia’s consumers.
As for ending competition, that assertion ignores reality. Cable companies added almost 700,000 voice customers during the second quarter to reach a total telephony customer count of 6.4 million, according to this week’s IP Media Monitor (subscription required). Turnabout is fair play, as telephone companies provide video services to some 2 million.
Then there are Google and eBay, two huge companies that did not exist at the time of divestiture. With a market cap of $115 billion and flush with cash, there is no area of broadband telecommunications Google isn’t exploring, from wireless data service to content aggregation. Online auction giant eBay purchased Skype, the Internet telephony pioneer, for $2.6 billion. EarthLink, another Georgia company, aims to be a leader in urban wireless data networks. This is hardly a market trending toward monopolization.
That’s why Foreman has to carefully couch her terms. The merger, she writes, will “mean the end of competition in traditional telephone service.” The subtle flaw here is that no one is competing to offer “traditional telephone service” anymore. The market is moving beyond it. Traditional phone service offers no portability, no intelligent functions and features like voicemail, call forwarding, call waiting and caller ID that come standard elsewhere, cost extra.
Consumers are choosing wireless and Internet-based telephony because the service is cheaper and better. Look at the numbers, BellSouth in its last three annual reports shows that residential access lines dropped from 16 million in 2001 to 12.4 million in 2005.
Even though the AT&T and seven “Baby Bells” have re-consolidated over the past several years, the market for telecommunications remains hotly competitive and basic phone service has never been so inexpensive. In fact, competition is driving mergers like this as the geographically fragmented industry tries to attain better economies of scale by reaching a national marketplace. AT&T and Verizon may have become larger corporations over time, but they do not overwhelm their competitors in size, scale and capitalization.
In the final analysis, how will the telecommunications needs of Georgia’s consumers, and the state economy, be served by a struggling, but stand-alone BellSouth? It’s clear that its shareowners see more value in the sale of the company. Foreman spends a lot of space on concern over loss of jobs. Would she prefer sale to a large holding company which would simply break up the company? AT&T brings new investment and a growth strategy. Consumers and businesses in Georgia and all of BellSouth’s territory will be better off for it.
Posted by steve.titch at August 16, 2006 02:42 PM
