AT&T-BellSouth: No Big Deal

by on March 6, 2006

There no doubt will be much gnashing of teeth in the wake of yesterday’s announcement that AT&T (the former SBC) has agreed to buy BellSouth. WIthin hours, to no one’s surprise, old-line consumer groups called for regulators to reject the merger. In truth, however, the acquisition just won’t make that much difference, and to the extent it does, it likely will help consumers in the southeastern states BellSouth serves.

Sure, the deal reduces the number of “Bell” telephone companies to two–down from the original seven created in 1984. But does that mean less choice and less competition for consumers? Far from it. Today’s traditional telephone companies are quickly becoming but one choic among many for consumers wanting to make a telephone call. Cable TV companies alone now provide telephone service for some six million Americans, a number that is rapidly increasing. And that doesn’t include the millions more service by stand-alone Internet telephone companies such as Vonage. Wireless telephone service provides another source of competition to traditional telephoney, with millions of Americans cutting the cord, and dropping their traditional service entirely. And while the merged AT&T-BellSouth will own Cingular, one of the leading wireless firms, the wireless market is still vibrantly competitive.

Perhaps more important for the future is the market for broadband Internet service. The networks that connect Americans to the Internet are increasingly important–serving as the platform for everythng from e-mail to Internet telephony, to (soon) television. Here, however, the traditional telephone companies are even less dominant. In fact, they are the challengers in this market, trailing cable TV firms, who have some 60 percent of the market.

As a result, this merger, like last years mergers before it, is no big deal to consumers. However, at least one area, consumers will likely be better off. BellSouth has trailed AT&T and Verizon in making plans to enter the television market. While the two larger phone companies are already starting to offer TV service in competition with traditional cable firms, BellSouth–with more limited resources – has lagged behind. As a result, while consumers in many areas of the country could soon be enjoying the benefits of more cable TV competition, consumers in the southeastern U.S. were facing a long wait for the same benefits. If the proposed deal goes through, cable competition could come sooner to the South.

Despite the easy rhetoric, this deal does not signal a return to the days of monopoly in telephone service. Instead, it serves as a reminder of how far competition has come, and how choices have increased, for American consumers. And that competition and choice will, if anything, be stronger due to this merger.

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