AT&T confirmed today that it plans to buy BellSouth and the remaining portion of Cingular wireless that it doesn’t already own, for $67 billion. If the deal goes through, AT&T will be both the biggest conventional telephone and the #1 wireless/cellular company in the US.
Marketwatch is reporting that analysts it has talked to don’t think the deal will have a big problem clearing regulatory scrutiny. Because state and federal regulators have to weigh in, the deal will take more than half a year to approve, if not longer.
Consumer and public interest groups pretty much uniformly think this is a rotten deal for the public, both because of the risk to network neutrality and the market power AT&T will accumulate to jack prices and lower service.
Marc Cooper, of the Consumer Federation of America–and one of the smartest thinkers on US telecom policy–puts it very succinctly:
“Telecommunications has now gone from a regulated monopoly to an unregulated duopoly with just two major players.”
The most important thing that can happen with this deal is that the Justice Dept., the FCC or Congress could require permanent observance of network neutrality provisions as a condition of its approval.
Although we can’t expect much from the Gonzalez-led Justice Dept, there is at least a hint of possibility at the FCC,with the anticipated approval of new commissioner Robert McDowell, who comes from CompTel, the industry group representing all the small telecos that compete with the likes of AT&T and Verizon. McDowell’s former CompTel colleague, Earl Comstock, made a very well-presented case to the Senate Commerce Committee last month, arguing in favor of enshrining network neutrality laws in law. Comstock also pointed out how the big telcos have failed on the promises they made to Congress ten years ago in exchange for getting some deregulation in the 1996 Telecom Act.
The question is: will McDowell change his tune upon joining the FCC, or might he join his Democratic colleagues to push for true network neutrality?
The truth is that the FCC isn’t the biggest hurdle for this merger. The Justice Department is where the issue of monopoly will be addressed, and where this whole thing can be shut down. I also expect Congressional hearings. The FCC can’t come up with new laws to control phone companies. That’s in the area of Congress.
Keep in mind that in 1996, the Telecom Act deregulated radio, and we saw a wave of consolidation. Five years later, consumers had a bunch of new choices, like satellite, internet radio, podcasts, and now HD Radio. None of that existed in 1996 (although we knew satellite was on the horizon).
I predict this merger will lead to the emergence of new companies in this area. New companies that will attempt to fill the voids created by the former baby bells. New companies that will provide access to the internet from other ways. Perhaps satellite internet. Perhaps an increase in municipal internet. Perhaps companies like Google will create their own broadband. They certainly have enough money. Other utility companies might look into this as an area for expansion. There’s too much money to be made for any red blooded capitalist to allow it to all go to one company.