Consumers Union believes the proposed SBC takeover of AT&T will hit consumers in the pocketbook, as our options for local phone service become controlled by fewer and fewer corporations. Our views are shared by other advocates, academics, market analysts and competitors. To make the situation worse, the events of recent weeks have spurred a domino-effect of other mega-mergers in the telecom market.
Competitors Cry Foul
For years, the National Cable & Telecommunications Association has stayed out of mergers in a public way, although individual cable companies were free to break with the trade association. But immediately after the SBC-AT&T deal was announced, NCTA president Robert Sachs signaled that the cable industry’s chief voice in Washington, D.C., no longer had merger laryngitis.
"'The proposed combination of the largest and second largest telephone providers in SBC’s 13-state region raises obvious antitrust concerns that regulatory authorities will have to scrutinize carefully,' Sachs said in a statement."
–Multichannel News (February 7, 2005)
Consumer Groups Weigh In
Promises of better deals on bundled packages of phone, Internet and video are unlikely to reach the masses, as Mark Cooper of the Consumer Federation of America explains:
"'Only 20% of consumers buy all three," says Mark Cooper, director of research at Consumer Federation of America. That being the case, he says 80% of the people 'have to spend ore to get the benefit of the bundle competition.'"
–Wall Street Journal (February 4, 2005)
SBC Communications Inc.'s takeover of AT&T Corp. may no longer be the "unthinkable" combination it was when proposed in 1997. Nonetheless, it's expected to draw the ire of competitors and consumer groups as it winds its way through a convoluted regulatory approval.
Groups including the Consumer Federation of America and the National Cable & Telecommunications Association already have blasted the merger, saying it will cut choices for consumers and mean higher prices. And they will likely lobby hard to make their case as the Federal Communications Commission, Justice Department and 26 to 28 states decide on the deal.
The question, observers say, is whether regulators–which have been increasingly permissive of large-scale telecom mergers–will give credence to those arguments.
"There's been very little enforcement lately with regard to mergers and acquisitions," said Paul Bartlett, an antitrust attorney and Trinity University professor. 'The only things the Justice Department really goes after are cartels and price fixing. The attitude right now seems to be that big is beautiful.' The FCC and Justice last year signed off on SBC and BellSouth Corp.'s $41 billion acquisition of AT&T Wireless, which the Bell companies merged with Cingular Wireless, the cellular firm they co-own. Regulators required few changes to the deal even as consumer groups argued it would limit consumer choice."
–RedNova.com (February 1, 2005)
Market Analysts See Less Competition Ahead
"The nation’s independent long-distance phone industry could be dramatically reduced in the wake of SBC Communications Inc.’s pending purchase of AT&T Corp, and MCI Inc.’s merger talks with Qwest Communications International Inc.
'The traditional competition as we have known it is going out the window,' says Maribel Lopez, an analyst at Forrester Research in Boston.
For consumers and companies, whose options for buying phone and data service have multiplied in recent years, the disappearance of the two would mean fewer choices—and, potentially, higher prices. New technologies, including cable phone service, and wireless and Internet calling have created alternative. But for low-tech households, taking advantage of new options is likely to mean paying an extra bill for a cell phone or high-speed Internet access."
–Wall Street Journal (February 4, 2005)
More Mergers In the Works
"Qwest Communications International Inc. is pushing hard to try and lock up a deal with MCI Inc., and other telecom companies are reconsidering their options as the industry is reshaping at a breakneck pace…..Verizon Communications Inc. hasn’t completed its analysis on whether to make a bid….Bellsouth is weighing its hand as the final pieces of the nation’s telecom puzzle fall into place. MCI is the last asset available should BellSouth want to create a national identity to compete against SBC and Verizon."
–Wall Street Journal (February 4, 2005)
