Wedding Bells : CONSUMER IMPACT : How Deal Would Affect Competition, Rates, Service
What’s the real meaning behind the proposed merger of SBC Communications Inc. and Pacific Telesis Group? And how does the deal--and the prospect of more mergers to come--affect consumers?
Here are answers to key questions:
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Q What happened Monday?
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A Pacific Telesis Group, a Baby Bell regional phone company that now provides service to 75% of California households and businesses through its Pacific Bell subsidiary, has agreed to be acquired by SBC Communications Inc., another Baby Bell with its key local market in Texas. Both Pacific Telesis and SBC were split off from AT&T; when Ma Bell was broken up in 1984.
The $16.7-billion deal hinges on a series of shareholder and regulatory approvals. The companies expect to close the deal by year-end.
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Q Why are these companies merging?
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A Faced with increasing competition from cable TV companies, long-distance providers and other rivals, some Baby Bells are seeking to combine to fuel expansion, increase market opportunities and gain efficiencies.
The deal would provide PacTel, considered the weaker of the two companies, with a stronger financial base and greater resources to battle the steep competition it faces in California. PacTel would provide the combined company with an entrance into growing international telecommunications markets such as Asia, Mexico and South America.
The combined company would take advantage of SBC’s proven strength in product development, marketing and sales, and PacTel’s network engineering skills and its efficiency in process management and cost containment.
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Q How does the new telecommunications reform law play a role?
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A The landmark legislation, signed into law earlier this year, tore down legal barriers that virtually assured local monopolies for telephone companies. Instead, phone companies will now be able to invade each other’s turf and battle over local, toll and long-distance service, not to mention a host of new communications technologies ranging from wireless cable to “personal communications services”--a form of cellular phone service.
The idea was to usher in a new wave of competition, that, presumably, will make more service available at a lower cost. That’s got telecommunications companies looking to form strategic alliances between companies that have the ability to offer the service, and those that have brand-name recognition with consumers in heavily populated cities and states. The proposed SBC-PacTel merger is a good example of this. Many analysts believe there will be more such combinations announced before year-end.
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Q Is this merger going to affect who I call or how I handle my phone service?
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A Not in the near future, at least. PacTel says that its two subsidiaries, Pacific Bell and Nevada Bell, will retain their identities, headquarters offices and all their current services to customers--including operators, directory assistance and telephone repair. Residential customers will still dial “O” for an operator, 411 for directory assistance and 611 for service, says Linda Bonniksen, a Pacific Bell spokeswoman. All current calling plans remain in place. Most customers won’t even notice the change, she says.
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Q What about rates? Is this indicative of new competition that’s supposed to make rates fall?
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A By itself, this deal will have no effect on local competition at all, experts say. Neither company competes with the other in any substantial way. “All this merger does is exchange one monopoly for another,” says Diane Schwilling, a spokeswoman for AT&T.; “It’s not opening up the market.”
However, consumers can expect more competition from rival telecommunications companies touting new cable, cellular and video services. This could lead to lower rates, and better service, in the long run, analysts say.
But in the short run, consumer advocacy groups express concern that deals like this will reduce competition and possibly result in higher prices.
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Q I’m more concerned that rates will climb. It’s easy for them to say now that they won’t raise rates, but what assurance do I have that that’s true?
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A All telephone rate changes must be approved by the California Public Utilities Commission, which reviews so-called tariffs filed by resident phone companies. Tariffs must be filed when a company proposes to change any rate--whether for basic service, local calls, long-distance, local toll or even the cost of various calling plans, Bonniksen says. Pacific Bell has no tariffs currently pending. However, if it files any in the future, consumers will be notified, as required by the PUC.
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Q What about lifeline phone service for low-income consumers? Will this still be offered at the same cost too?
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A Yes, says Pacific Bell’s Bonniksen. However, there is talk of changing the current system for getting lifeline service from the current “self-certification” process to a more grueling procedure in which lifeline customers will have to prove they are poor to get the low rates, says Ken McEldowney, executive director of Consumer Action in San Francisco.
Notably, Pacific Bell has been a staunch advocate of the current self-certification process and of offering affordable lifeline service. However, when SBC starts calling the shots, McEldowney fears that may evaporate.
* Pacific Telesis, SBC Communications agree to merge. A1
* A wave of similar mergers can be expected. A1
* How PacTel got to be weaker of Baby Bells. D3
* PacTel CEO victim of long-sought deregulation. D3
* Approval is likely, but deal still will face scrutiny. D4
* Workers hope for only modest job cutbacks. D4
* PacTel holders bailed out from lagging performance. D4
* Major realignments transforming communications. D5
* How big industry players are plotting their futures. D5
* SBC may reorder PacTel’s strategies in California. D5
* AirTouch to face tougher competition after merger. D5
