Getting rid of the competition Telecommunications: Merger of local phone companies keeps customers on hold for better service.

August 05, 1998

THE LATEST round of telephone mergers fulfills only half the mandate of the ambitious 1996 Telecommunication Act.

Opening the industry to marketplace forces has led to a raft of mergers and consolidations, but the promised opportunities for competitive choices, improved service and lower prices have been slow to arrive.

Seven regional operating companies (the Baby Bells) emerged after the court-ordered breakup of AT&T. The theory had been that these companies would provide competition in local and long distance service. These local phone companies had the financial, technical and operational resources to enter each other's markets -- and AT&T's, too.

But instead of competing, they are merging and absorbing potential competitors.

Bell Atlantic's desire to enter the New York market was satisfied by merging with Nynex. It now wants to enter data and wireless areas by merging with independent GTE.

SBC (formerly Southwest Bell) wanted to break out of its region. So it has been buying other Baby Bells, first Pacific Telesis and now Ameritech. If the Bell Atlantic-GTE and SBC-Ameritech mergers go through, these two companies will control two-thirds of the nation's local telephone lines.

These companies argue that mergers increase their efficiencies and spread costs over a larger customer base. Bell Atlantic and GTE said the combined company would save $2 billion and generate $2 billion in additional revenue within three years. That may be great news for stockholders but not necessarily for customers.

Company executives argue that these bulked up telephone companies will be able to compete globally and offer a wide range of services. We lived through an era of a large telecommunications company that made similar promises. Breaking up AT&T has done more to improve service, advance telecommunications technology and lower prices that any other government action taken before or since.

If federal officials allow the combinations of SBC and Ameritech and that of Bell Atlantic and GTE without forcing them to relinquish their monopolistic control of local phone service, many of the benefits of head-to-head competition aren't likely to flow through to consumers.

The same holds true in the area of long-distance service, where AT&T has thwarted efforts by the Baby Bells to emerge as full-fledged long-distance competitors.

Business and residential customers should be able to choose from a wide variety of companies that offer voice and data services, just as they do for so many other consumer products.

Pub date: 8/05/98

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