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The news that AT&T would purchase BellSouth for $67.1 billion triggered a flashback. In 1984, the government dismantled the Bell System, breaking it up into a pack of operating companies. A generation later, the pieces seem to be reassembling themselves.
But todays telecommunications landscape is vastly different from that of 1984. Theres an established market for cellular communications that didnt exist then, and consumers and businesses alike require broadband for Internet services, including voice and video over IP.
According to AT&Ts calculations, the cost savings are expected to top $2 billion two years after the deal closes and eventually total about $18 billion as a result of layoffs, lower advertising expenses and lower operating costs. Analysts expect the merger to sail through the antitrust and Federal Communications Commission regulatory reviews.
Were not convinced. This deal should sound the alarm for small and midsize businesses and even large ones. Will we really be better off with just two telecom players: AT&T and Verizon? We dont think so. A duopoly is not the robust field of competitors envisioned by Judge Harold Green in his 1984 breakup of the Bell System. Federal regulators must demand clear proof the merger wont diminish competition and, therefore, reduce choices and keep rates high.
At the time of the breakup, the needs of enterprise customers were important to AT&T. Today, consumers rule. Advances in wireless, mobile applications, rich content delivery, and voice and video over IP are all driven by the demands of consumers. The narrowing of competition just makes it that much more likely that enterprise concerns will take a back seat or, worse, be ignored.
Its likely that new technologies will find it difficult to penetrate a market dominated by an unregulated duopoly. It may not be possible to stop innovation, but its certainly possible to slow it. The deal will make it all too easy for the best technology to be squashed or for the wrong technology to be blessed.
Perhaps most ominously, the future of Internet neutrality could be imperiled. The pressure is already on to divvy up Internet bandwidth and make further progress dependent on toll fees. What position will AT&T take on the issue? With only two big players in the market and the barrier to new entrants insurmountable, it will be easier to push the notion of auctioning quality Internet service to the highest bidder.
Sooner or later our government must take a stand. First, the benefits of competition must be fought for—and that includes having the courage to stand up to powerful lobbying interests that benefit from consolidation. Second, Net neutrality must be upheld. Enterprise telecom customers deserve to have a wide choice of quality providers. They wont be getting that with only two players in the market. The FCC and Department of Justice should block this merger.
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