The AT&T and BellSouth Merge is evidence of company monopolies as giant corporations find merging more financially profitable than competition.
"There were giants in the earth in those days." Genesis 6:4. The time of the giants has returned. Media giants breed from loosened regulatory laws roam freely and continue to grow. The $67 billion merge between AT&T and BellSouth will make a precarious impact for consumers. This unholy alliance could negatively effect jobs, stifle small business markets, potentially lead to price gauging and is a step toward reuniting the fractured Bell telephone company monopoly prior to 1984.
The 1984 court ruling fractured the AT&T Corp into eight companies - leaving AT&T as a long distance provider while the seven "baby bells" functioned as regional Bell operating companies: Southwestern Bell, Pacific Telesis, Ameritech, Bellsouth, U.S. West, NYNEX and Bell Atlantic. Southwestern Bell, now SBC, managed to merge with Pacific Telesis, Ameritech, and AT&T - adopting its initial name in November 2005. Now the newly converged AT&T giant is aligned with BellSouth.
What the Company Gains:
AT&T inherits (while cutting 10,000 jobs) a total of 70 million phone subscribers, over 50 million wireless users and 10 million DSL connections, thus becoming the number one carrier. Consumer's only alternate choice is Verizon that recently merged with MCI. "We've gone from a regulated monopoly to an unregulated duopoly," said Mark Cooper, director of the consumer research for the Consumer Federation of America (CFA).
AT&T Chairman and CEO Edward E. Whitacre Jr. said. "This merger is a logical next step that creates substantial value for customers..." - But at what price?
The Affect on Small Business:
Small businesses could take the direct hit from this monopolistic consolidation. Lisa Pierce, an analyst with Forrester Research, in Cambridge, Mass. said customer service may decline further down the business hierarchy. In particular those small businesses in the southeast would experience "negotiating leverage decline" and rising prices.
How this Happened:
Yet, giants are only allowed to roam when regulatory fences are down. The real culprit is the one that opened the cage. The Telecommunications Act of 1996 initially was intended to create competition between telephone networks by allowing those rival companies to tap into one another's wires and switches. This loosened company barriers established by the Communications Act of 1934. Lawmakers predicted in a decade consumers would save $550 billion in long distance, local telephone, and cable television combined. Industry groups had hoped to see an increase of 1.4 million jobs and a gross domestic product of $2 trillion. Instead ten years later the telecommunication's industry has lost that amount in addition to 500,000 job cuts all while telephone and cable bills skyrocketed.
What went wrong? Joe Laszlo, a JupiterResearch broadband analyst told internetnews.com, "It's in the blood. Although the 1996 Telecom Act was designed to foster competition among the baby bells, the companies found it wasn't in their interest to compete." Companies merged to consolidate gains and compete in a new platform provided through the exponential growth of new technologies - mainly the internet. Technology is another force driving merges. In order to compete with newly innovative internet communicative platform companies - Google, Yahoo, etc that provide - instant messaging, Yahoo Chat, and Vonage phone service - telecommunication companies consolidated to gain an edge. This survival of the fittest has required the fittest to be the biggest.
The AT&T and Bellsouth merge like previous merges will eventually increase prices, promote anti-competition, and negatively effect jobs and small businesses. In the original mythical Greek battle, the battle between the gods and giants, the giants lost, but they are now back. And here they will stay until combative policy ends their dominance.
