Rebuilt Ma Bell Hits Enterprise

The impact of having primarily two telecom giants-AT&T and Verizon-will largely depend on the size of the company.

AT&Ts $67.1 billion acquisition of BellSouth means the number of telecommunications providers enterprise customers can turn to is shrinking rapidly. But the impact of having primarily two telecom giants—AT&T and Verizon—will largely depend on the size of the company.

Through the former SBC Communications purchase of AT&T and Verizons acquisition of MCI, there are two large telecom companies focused on the enterprise.

"The one thing that hits you in the gut is there is more consolidation in the market and less control to pitting one carrier versus another," said Eileen Eastman, an analyst at The Yankee Group, a Boston-based research company. "But, while that fear is pervasive, each case will be different."

According to AT&T officials in San Antonio, business customers would benefit from converged services and a single point of contact for both wire-line and wireless offerings. Companies would no longer have to receive a separate bill from Cingular Wireless, which today is jointly owned by AT&T and BellSouth.

/zimages/2/28571.gifExperts think singular ownership will help Cingular. Click here to read more.

AT&T CEO Ed Whitacre said on a conference call March 6 that this merger "would be a boost to business customers who are increasingly looking for converged services and a single point of contact for both wireless and wire line."

Whether Whitacres prediction pans out remains to be seen. In the meantime, heres what enterprise customers can expect:

Large multinational companies: Eastman said that companies with global operations have the least to worry about with the AT&T deal. The primary reason: Theres plenty of competition for global telecom services. Eastman said that AT&T customers could easily defect to networks belonging to BT Group, in London; NTT Group, in Tokyo; VSNL, in Mumbai, India; and Equant, in Amsterdam, Netherlands.

In addition, Eastman said that services giants such as Electronic Data Systems, IBM and Computer Sciences Corp. also offer telecom services in package deals. "There are alternatives," said Eastman.

Those alternatives are one reason large corporations might actually benefit from consolidation. "AT&T might decide to give larger customers even greater price incentives to stay with them and make that up on the backs of smaller and midsized customers," said Lisa Pierce, an analyst with Forrester Research, in Cambridge, Mass.

Large enterprises with headquarters in BellSouths territory may gain negotiating leverage with the merger because they would increase the volume of services they purchase from AT&T, Pierce said. Enterprises with remote sites in BellSouths territory could potentially receive tighter SLAs (service-level agreements) once all their sites are on the same network, she said.

Bill Rompf, vice president of marketing at, in Louisville, Ky., said that he does not anticipate any change in service level or customer care. "Frankly, I dont think this is going to change the quality of the service at all," Rompf said, adding that there are other small, local carriers in the market as well.

"There are so many niche players out there, and thats what keeps the price competitive," he said.

Midsize companies: The jury is out on how midtier companies will be affected. Eastman said that AT&T is likely to repackage some of its high-end network services and that companies in the middle market will see "more robust offerings."

The wild card for the middle market, however, may be service, said Pierce. AT&T has already said it plans to cut 10,000 jobs, and the consolidation may leave smaller customers with less support, she said.

"We talked with our BellSouth representative the other day about [the proposed merger], and right now we dont know anything positive or negative," said Greg Clements, chief financial officer at Savannah Tire, in Savannah, Ga.

"If the pricing does take an upward turn, of course Ill look at other options," Clements said. "I pulled out my business cards from the other regional [competitors] weve talked to. We just have to wait and see."

Small businesses: Pierce said that customer support could weaken as AT&T moves down the food chain. Small businesses based in the Southeast would likely see their negotiating leverage decline, and they could face rising prices as a result of the consolidation.

/zimages/2/28571.gifWill AT&Ts acquisition of BellSouth mean bad news for SMBs? Click here to read more.

Since competition opened in the local markets in 1996, small businesses were a frequent target of the Bells rivals, which often promised more personalized service and customer care than the entrenched Bells, which increasingly focused on larger enterprises.

Whether large companies such as AT&T focus on the smaller businesses remains to be seen, said Pierce. AT&T didnt discuss its strategy for the small to midsize markets.

Although the mergers impact on business customers is uncertain, analysts widely expect the deal to be approved by the Department of Justice and the Federal Communications Commission. "My great fear has been unregulated duopoly. I do think were headed down this road," said Pierce.

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