SBC: AT&T Becomes You

Opinion: SBC should become AT&T-not the other way around.

I may be alone in this, but I have always thought the breakup of AT&T was stupid and probably did more to hinder the advance of new technology than to help it. As for pricing, AT&Ts prices were always what regulators said those prices were supposed to be.

That AT&Ts long-distance service on the eve of its 1984 breakup cost more than MCIs was a reflection of an investment in universal service and a first-class national infrastructure. MCI was merely cheap.

After the breakup, telecom services went from being easy to buy, if expensive, to difficult to buy and costing what they probably would have cost anyway. In the process, we lost the chance to have a sensible national telecom policy, for which I think we suffered.

Today, AT&T is a "$50 billion company thats become a $30 billion company that this year will be a $25 billion company," according to one analyst. In this circumstance, what once seemed unthinkable—that one of the Baby Bells would buy its former parent—now seems quite necessary for AT&T to survive.

SBC, the former Southwestern Bell, is paying $16 billion for AT&Ts troubles, hoping AT&Ts profitable business customers will come along for the ride. SBC has already said that 13,000 employees wont make the trip. This savings makes up 60 percent of the claimed $15 billion in "synergies" the combined company will accrue immediately.

/zimages/3/28571.gifClick here to read more about the proposed merger.

In 1984, the divestiture of AT&T was supposed to increase competition in the telecom industry. I remember being told that before long there would be several companies vying to sell me a dial tone for my home and office. The resulting companies were supposed to fiercely compete and the number of telecom players was supposed to dramatically increase.

It doesnt seem to have worked out that way. The telephone monopoly, which had done a very good job of meeting our telecom needs right up to the day it was killed, has been replaced with an oligopoly.

What divestiture brought us was a variety of telecom scams and failures, with WorldCom being only the best-known example. The old-school telecom companies did what they could to slow or stop new technologies to protect their existing business. That is, they did so right up to the moment when they managed to drive out other broadband competitors, leaving consumers the huge choice between a DSL modem and a cable modem.

Businesses have fared better under divestiture, getting better price breaks than consumers and more broadband options. Businesses also got a usable voice-over-IP option earlier, though my guess is there are now more homes with VOIP than offices.

The real competition that exists in the telecom industry came about because of new technologies and new players taking advantage of them. It doesnt take a genius to see that VOIP, Wi-Fi, WiMax and other new technologies are driving telecom competition, not anything to do with the breakup of the Bell System.

My belief is that new technologies should be competitive, but basic services such as dial tone and long distance were well-served by the monopoly. New technologies—cellular, for example—might have been made off-limits to the monopoly, resulting in lots of truly new competitors, rather than just Baby Bells with new names.

I am well aware that mine is a minority opinion, but I liked the AT&T monopoly and think that, properly managed, it could have kept the United States the undisputed leader in telecommunications.

And since AT&T was unnecessarily broken up, heres another minority opinion: After the purchase, SBC should become a holding company and AT&T should be the brand and the operating business. AT&T remains the best-known and one of the most respected global brands. This is a much bigger asset than the SBC brand, which can never hope to achieve the recognition accorded AT&T.

I am not saying AT&T doesnt have serious problems and I am not sure that SBC can solve them. Competition—from cable, VOIP, wireless and other technologies—will only increase. The "new" AT&T, or whatever name SBC chooses, will have to embrace these in order to survive. It probably also needs some help from regulators who need to take steps to protect the integrity of the national infrastructure. I do not believe we are doing enough to protect this vital resource from disruption, whether intentional or accidental.

No, my new AT&T wont bring back the good old days when Bell Labs ruled technology and the company was, at 50,000, New Jerseys largest employer. (SBC is moving AT&Ts headquarters to San Antonio!) But it will give SBC some valuable cachet in the marketplace and give the AT&T brand a shot at regaining some measure of the leadership it has been denied.

SBC should become AT&T, not vice versa.

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