Ma Bell and her babies

[SOURCE: Financial Times, AUTHOR: Editorial Staff]
[Commentary] The proposed merger of AT&T and BellSouth, which was announced yesterday, is a testament to how much things have changed in the world of telecommunications in two decades. Since the old AT&T was split into a long-distance company and the Baby Bell local telephone companies in 1984, the competition facing fixed-line operators has increased markedly. The mood in Washington towards big mergers is more forgiving and there are reasons for greater leniency in the communications industry. Phone companies now face competition both from cable companies and from providers of Internet telephony. Consolidation in the cable industry, together with regulatory and technological changes allowing cable companies to offer phone services alongside cable television and Internet access, has produced the biggest change. The increase in the number of US households with broadband Internet connections has also led small Internet companies to compete head-on with the Bells. The phone companies also face regulatory difficulties in competing effectively with the cable companies in offering television services over broadband connections. So regulators should look favorably on an AT&T/BellSouth combination. Competition between phone and cable companies spanning telephony, television and broadband Internet (the so-called "triple play") is likely to have more benefits for consumers than the regional break-up of AT&T provided. Internet phone competition is a useful added element to this framework. But phone companies must not use reunification to distort the Internet. The FCC has yet to reach a view on net neutrality and the review process for this merger provides an ideal opportunity to do so. This deal will lay the cornerstone for the future regulatory framework governing communications in the US. Allowing strong phone companies to compete effectively with cable companies, while ensuring that the Internet remains free from interference, is the right balance.
http://news.ft.com/cms/s/07829608-ad80-11da-9643-0000779e2340.html
(requires subscription)