AT&T Buys T-Mobile, And You Lose?

Interesting perspective from the LA Times David Lazarus:

When the Bell telephone system — aka AT&T — was broken up in 1984, consumers were told this would be a good thing because it would increase competition.

When the U.S. telecommunications market was deregulated in 1996, consumers were told this would be a good thing because it would increase competition.

And now AT&T is planning to merge with T-Mobile, the latest in a string of acquisitions that effectively restores Ma Bell to her former girth yet allows the company to operate in a looser regulatory environment.

Consumers might wonder if they've been played.

"There's no way this latest merger can be good for consumers," said Sally Greenberg, executive director of the National Consumers League. "This places a lot of power in the hands of only a few companies."

What's that mean?

The reality, however, is that the most competitive segment of the telecom market — wireless service — will now have one fewer player, and we are a big step closer to a marketplace controlled by only two companies, AT&T and Verizon.

The AT&T-led Bell system effectively controlled phone service in the U.S. from 1877 to 1984. What's particularly galling is that for years the descendants of the Bell system insisted that they had no intention of re-creating the old network.

In 1998, Ed Whitacre, then CEO of telecom giant SBC, addressed wary senators in Washington about his company's planned $72-billion acquisition of rival Ameritech. He acknowledged concerns that "SBC and Ameritech have set out to turn back the clock and re-create the old AT&T Bell system."

It won't happen, Whitacre testified. "The competition genie is out of the bottle," he declared.

SBC went on to purchase AT&T for about $17 billion in 2005 and subsequently assumed Ma Bell's name. In 2006, it snatched up BellSouth for $67 billion.

Meanwhile, Bell Atlantic merged with GTE in a $65-billion deal to form Verizon, which in turn acquired MCI for $6.7 billion. Where's that competition genie now?

We have a problem here. First is, essentially we're heading towards a two company telecom world. Second is a broader problem, that fewer and fewer people own everything. We have less and less telecom companies, owned by fewer and fewer competitors. This same problem can be brought up in regards to our media as well. Capital is being consolidated increasingly in the United States, and it stands to reason that we're losing companies as that happens.

As bad as that is, let's not forget:

When the Federal Communications Commission deregulated the telecom market in 1996, the intent was to compel local phone companies to open their networks to new players. That never quite happened. As the companies underwent consolidation, barriers to entry for new players grew steadily higher. Consumers saw fewer telecom companies providing a greater array of services.

And prices have continued to rise.

In other words, you'll pay more and more either way. Which begs the question, do you lose either way? I think it's bad for the country that we have fewer and fewer companies controlling the market in different fields, but at the same time, competition doesn't cure all ailments the way it does in text books. While we need more competition, we have to remember that it takes a lot more than just "market forces" to improve the lives of the masses.