June 9, 1997 in Nation/World

Phone Giants Won Direct Line To Your Wallet

Fred Davis Washington State Uni
 

Not too long ago, during one of my lectures on 1996 telecommunications changes, a journalism colleague wondered - correctly - whether the U.S. Justice Department would block a deal involving any of the seven regional Bell telephone companies if they tried to merge with each other or some other giant phone carrier down the road.

His concern was in response to a question I had posed about the ramifications of the new law and the possibility of further phone monopolies, which seem to be encouraged under the Telecommunications Act of 1996.

After all, as I cautioned back then, the so-called Baby Bells had become more powerful following the 1984 government-mandated split from AT&T;, their “Ma” Bell at the time. And the trend, as I saw it, pointed more than ever to some kind of fusion of effort by the Bells to directly challenge AT&T; - or join forces with the giant long distance carrier to corner the local and long distance telephone markets.

Turns out, both my colleague and I apparently enjoyed a prophetic moment. The Justice Department hasn’t said no to any phone mergers, at least not yet. But the hair-raising announcement of a few days ago that San Antonio-based Southwestern Bell Co. - SBC, it’s now called - plans to merge with AT&T;, has industry observers scratching their heads.

Just a couple months earlier, SBC had gobbled up West Coast Pacific Telesis - another in the venerable Bell family - in a $16.5 billion blockbuster deal. The recent acquisition seemed only to sweeten the AT&T; merger proposal that some see as approaching, or in excess of, an eye-popping $50 billion.

Of course, the mega-deal must first pass antitrust muster. Not only will this marriage create the largest phone system on U.S. soil, it will be eerily reminiscent of the days when AT&T; virtually stood alone in the phone business - and had a chokehold on local and long distance service.

To some critics, including me, this is a case of deja vu, and one more disturbing instance of how the telecommunications deck of 1996 was stacked in favor of the phone companies - and not consumers. But what do you expect when local and long distance companies give our elected federal representatives a collective $4 million in lobbying enticements to plead their case before Congress?

That’s precisely what happened 2-1/2 years ago, when Republicans took control of Congress and the phone companies, sensing a new pro-business attitude, pulled out all the stops to win their way in sweeping phone legislation.

The thing that most concerns me about the AT&T-SBC; merger is that it has M-O-N-O-P-O-L-Y written all over it. So does a pending merger involving mid-Atlantic-based Bell Atlantic and the NYNEX Corp., which serves the populous Northeast. The consensus is that the Bell Atlantic-NYNEX deal, if it goes through, could be even bigger than AT&T; and SBC, which would really give new meaning to rising phone monopolies.

All of this means consumers will have fewer choices in phone service that eventually could work to their disadvantage. For, it’s one thing for phone companies to get the ear of Congress. But it’s a whole new ballgame when the biggest byproduct of the 1996 telcom law is the formation of a new telecommunications monster - the kind of thing that was supposed to have been slain during the big 1984 breakup.

Naturally, this flies in the face of last year’s telecommunications changes, which were supposed to drive down local and long distance rates through increased competition.

Anybody who has been following the various telcom changes since their inception 16 months ago expected some start-up problems. Having difficulties in finding or carving one’s own niche in a crowded communications industry, while understandable, is no excuse for some of the missteps on the part of some companies since the law took effect.

One of those apparent missteps involves Chicago-based Ameritech, the Bell company which serves the Great Lakes region. Ameritech was the first of the Bells to apply to provide long distance service. But instead of being a pioneer in this area as a local phone service provider, Ameritech is about to suffer the embarrassment of having its application go up in smoke.

The Justice Department has recommended that the application be rejected by the Federal Communications Commission because the guidelines, under provisions of the new telcom law, are to first establish local phone competition, which the Justice Department says was not done.

Like the disturbing number of new phone monopolies on the rise, less - not more - in terms of the Ameritech debacle, may be better.

A lot better.

xxxx

The following fields overflowed: CREDIT = Fred Davis Washington State University


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