Reed Hundt on Telecom Mergers: From “Unthinkable” to “You Want ‘em Big” in Less than 10 Years!

by on March 7, 2006

My oh my, how things change. Less than 10 years ago, FCC Chairman Reed Hundt preemptively declared that a rumored merger between AT&T and SBC would be, in his words, “unthinkable” under antitrust laws.

So I found it peculiar when I opened up the papers yesterday and today and read Reed Hundt’s analysis of the pending merger of AT&T–which has already taken over SBC–with Bell South. In yesterday’s Wall Street Journal he argued rather matter-of-factly that: “It’s like a marriage between a couple that’s been dating for a decade. It’s so predictable as to not attract a great deal of questioning.” And then I opened up the Washington Post business page today and read this from Hundt: “It’s a sport. It’s a competition. In this business, scale really matters. It’s like NFL linemen. You want ‘em big, you want ‘em fast, but most important, you want ‘em big.”

Talk about your sudden changes of heart! Let me just reprint a bit more of what he said back in the summer of 1997 about such mergers:

“Combining the long distance market share of AT&T in any RBOC region (even as it may be reduced by RBOC entry) with the long distance market share that reasonably can be imputed to the RBOC yields a resulting concentration that is unthinkable. [If we impute] to AT&T even a modest percentage of [local] market share taken form the existing Bell incumbent in that Bell’s region, as we must do under our potential or precluded competitor doctrine, then under conventional and serviceable antitrust analysis, a merger between it and the Bell incumbent is unthinkable.”

So, in less than ten years, he’s gone from thinking such a combination was “unthinkable” because of the “resulting concentration” to now calling the move “predictable” since “scale really matters” and “[we] want ‘em big.”

File this one under “The Re-Education of a Regulator”!

But seriously, I have to give Hundt credit for recognizing the changed competitive landscape since 1997. Long-distance has largely been canabalized by the rise of rigorous wireless competition and flat-rate, nationwide calling plans. The Internet is everywhere, which means IP-enable calling is a new threat to the old players. And the old Bell copper empire has now become a copper cage they are fighting their way out of. It’s all about fiber now to ensure they can compete against cable’s high-speed offerings and whatever else competitors might throw at them. The world has changed in amazing ways in just 10 short years. Reed Hundt’s changed thinking on this issue proves that.

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