Archives: Phones & Cell Phones

Now that AT&T and SBC Communications are merging the media is asking: could this be good for consumers?  The resounding answer is "no." 

According to a January 28, 2005 Wall Street Journal article, Some Fear Prices Could Rise, "An SBC-AT&T merger would represent the first time that a Bell would buy one of the major long-distance carriers. And since local and long-distance service increasingly are packaged together, an SBC-AT&T combo may be able to raise rates for both, consumer advocates say. That could be especially true in the 13 states, covering about a third of the U.S. population, where SBC is the dominant local-service provider. Such a merger would eliminate one big competitor from the market.

'It's a shock that AT&T would be gobbled up by one of its children,' said Gene Kimmelman, senior director of public policy at Consumers Union, which publishes Consumer Reports. 'But more important would be the even bigger shock to our pocketbooks.'

Yet the Bells and even many regulators believe a lot has changed and it no longer makes sense to look at even the largest players as having a stranglehold on the market. Cable companies now provide serious competition to the Bells, and Internet technology has made it relatively cheap for start-ups to offer Internet-based calls. Growing numbers of consumers, particularly younger people, rely primarily or entirely on cellphones, and most areas have several cellphone competitors."

Consumer advocates believe this will affect the consumers' pocketbooks for the worse, and although there are many ways you can "reach out and touch someone" these days, competitive services are lacking robust competition as well.

The article goes on to say, "Although people have changed their calling and spending habits, the removal of a competitor could make it harder for mainstream consumers to find bargains on conventional phone service, particularly since the major long-distance carriers have largely stopped advertising to consumers. Some consumer advocates say the discounted packages of local and long-distance service sold by the Bells make sense only for big spenders and that these cut-rate plans could be short-lived.

One low-cost option AT&T has expanded and polished is an Internet-based phone setup that offers combined local and long-distance service at about half the price of a comparable package from the Bells. The service, which is also offered by companies such as Vonage Holdings Ltd., is laden with features the Bells can't or don't offer. If it takes over AT&T, SBC isn't likely to expand this competitive service in its current form -- at least not in its home territory, where it would compete against SBC's traditional phone service.

'Competition without competitors doesn't work,' said Mark Cooper, director of research for the Consumer Federation of America, a consumer-advocacy group based in Washington. 'This reduces price pressure, as well as the pressure to innovate.'

Mr. Kimmelman and other consumer advocates said there's a misperception that the arrival of new technologies, such as wireless and Internet-based calling, has led to more low-cost choices for the average consumer. Wireless remains more expensive than landline service for light phone-service users, and Internet-based service requires a high-speed Internet connection that adds $20 to $45 a month to a consumer's phone or cable bill. Internet-based phone service isn't an option for the roughly 70% of households that don't have high-speed Internet service.

'You will find that you will have to spend an awful lot more to get the competitive choices in the future,' said Mr. Kimmelman."

Learn about other issues affecting your telephone, find out more about phone prices on the rise and What's at Stake.