Not Your Ma's Bell

[SOURCE: Wall Street Journal, AUTHOR: Editorial Staff]
[Commentary] If the criticism of AT&T's plans to buy BellSouth for $67 billion sounds familiar, it's because the same hyperventilating occurred last year when SBC bought AT&T and Verizon acquired MCI. We're back at the same old stand, and while all this telecom consolidation may or may not pay off for shareholders, the benefits to consumers are clear. Consumer activists are convinced that these telecom mergers mean fewer competitors and higher prices. But they're using a model of the industry that dates to the break up of Ma Bell in 1984, when cable companies and phone companies didn't provide each others' services and the consumer wireless market was practically nonexistent. So when Mark Cooper of the Consumer Federation of America asks the Justice Department to block the AT&T/BellSouth merger because there won't be "enough competition" for phone service, he's looking for competitors in the wrong places. Cooper refuses to acknowledge phone services offered by cable companies, wireless carriers and VOIP providers in today's telecom market. But these mergers are a direct result of competitive pressures from those very technologies. AT&T knows it has more to fear from a cable giant like Comcast than from a fellow phone company like Verizon. Today's traditional phone companies have been steadily losing lines to wireless providers, and they need the size and synergies to invest in broadband, where cable companies already have a big head start. The most obvious benefit to consumers is the lower prices that result from increased "intermodal" -- or cross-technology -- competition. But another benefit is the faster rollout of new services made possible by economies of scale. The deal's bigger regulatory hurdle might be the Department of Justice's Antitrust Division, which is likely to receive pressure from Democrats on Capitol Hill aligned with consumer activists. Typical was the response from Massachusetts Democrat Ed Markey, a senior Member of the House Energy and Commerce Committee, who said "Twenty years after the government broke up Ma Bell, this deal represents a mother-and-child reunion." But the child has grown up and the mother has changed, even if Rep Markey's rhetoric hasn't. Consolidation is being driven, as it should, by changing technologies, and by all manner of competition in a telecom world that Ma Bell wouldn't recognize.
http://online.wsj.com/article/SB114170205529391127.html?mod=todays_us_opinion
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