Peril in the Telecom Market
Bigger isn’t always better in the wireless industry, and consumers may not buy the claim of Cingular Wireless that its proposed acquisition of AT&T; Wireless would lead to better service for the companies’ combined 46 million subscribers, the most in the land.
Both Cingular and AT&T; already score below the industry average for customer service, according to Consumer Reports magazine, and both are struggling to blend differing technologies into a nationwide system at a time when cellular technology is in flux.
Competitors’ customers also have reason to be wary of a $41-billion deal that, if cleared by federal regulators, will shrink the ranks of U.S. cellular service providers to five companies from six and, possibly, spark a long-awaited industry consolidation.
In the short term, other wireless companies -- Verizon, Nextel, T-Mobile USA and Sprint -- will feel more pressure to grow, and consumers could enjoy another wave of attractive marketing offers. The longer outlook, though, will be bleaker if continued acquisitions dampen the competition that produces these good consumer deals.
The “bigger is better” mentality is forcing a restructuring of the traditional telecommunications world, with traditional local phone companies and long-distance providers invading each others’ markets.
To the extent that the changes bring better products and service, lower prices and easier-to-understand billing, it’s a good thing. But Tuesday’s deal could turn Cingular owners SBC Communications and BellSouth into conglomerates that dominate geographical areas where they offer combined cellular, local phone line and long-distance service.
It’s been 20 years since an antitrust lawsuit broke AT&T; into the pieces known as Baby Bells. These companies, no longer toddlers, now control 85% of local access lines and, in some states, more than half of the long-distance market. With Cingular’s acquisition of AT&T; Wireless, the three biggest (Verizon, SBC and BellSouth) also would control more than half of the nation’s wireless business.
Unless federal and state governments increase their vigilance, residential and business customers could get stuck with new monopolies that control much more of people’s lives than the hard-wired telephones of the old Ma Bell days.
