Dial ‘M’ for Mega-Merger
For whom is bigger better? That is one of the questions looming over the proposed mega-merger of SBC Communications, the owner of Pacific Bell, and Ameritech Corp. Combined, they could dominate local telephone markets across the country and squeeze out lesser competitors. Consumers could find themselves in the end stuck with higher bills.
No wonder the merger is causing static in the already tangled line of telephone deregulation. At face value, the proposed merger appears at odds with the stated goals of the deregulation that began with the breakup of Ma Bell: to spur competition and create better deals for consumers. Long distance service has generally gotten cheaper, but not local phone rates, especially for residential users. Critics fear the SBC-Ameritech combination would merely expand the companies’ lock on local service.
SBC Communications--the former Southwestern Bell--and Ameritech were among the seven regional phone companies, known as Baby Bells, created when AT&T; was broken up under a 1984 consent decree. AT&T; and other carriers got control of long distance service. The Baby Bells got near exclusive control of local service.
Some of the defects in the 1984 action, including the Baby Bells’ local-service strangleholds, were supposed to be answered by passage of the Telecommunications Act of 1996. Local phone companies would be allowed to enter cable ventures and the long distance business only if they could prove that competitors, including long distance carriers, had adequate access to their local phone exchanges. But there’s been a standoff on this front. And two years after the telecom act, the Baby Bells have pretty much abandoned their cable ventures. Many have flung themselves into mergers instead--SBC with Pacific Telesis Group, Bell Atlantic with Nynex Corp. Now SBC is at it again, this time with Ameritech.
SBC and Ameritech are pursuing a “national-local” strategy. The idea is to nab local service in the top 30 national markets and use it as a springboard for national Internet access and wireless communications services and long distance competition. They say the merger is about more competition, not less. But the companies combined would dominate access to about 40% of the nation’s local phone lines and operate in 18 states, including California. The companies’ spin on the deal is that it is “Viagra for competition.” But Viagra is proving to have some unpleasant side effects--and the consequences of this merger may include more than just the advertised corporate vigor.
