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MARIN COUNTY'S NEWS MONTHLY - FREE PRESS
(415)868-1600 - (415)868-0502(fax) - P.O. Box 31, Bolinas, CA, 94924

June, 2005

 

THE QUIET LITTLE MEGA-MERGER OF SBC AND AT&T;
by Sandy Leon Vest

This month across the state, the California Public Utilities Commission (CPUC) will hold its little-publicized public participation hearings on SBC's anticipated takeover of AT&T.; If successful, the merger would create the largest telecommunications company in California. It would, in fact, create the largest phone company in the US, spelling the end of the iconic Ma Bell and likely saddling consumers with higher bills, more confusion and fewer options.
If the deal goes through, SBC stands to gain a blue-chip list of corporate customers and pump up its long-distance business. Such a merger would dismantle once and for all the 120-year-old AT&T;, for generations the only phone company most Americans knew. It's value to SBC lies in its roster of large corporate customers. Citigroup, General Electric, General Motors, Wal-Mart and Merck have all used AT&T.;
Consumer advocates have excoriated the acquisition of AT&T; by SBC, with Consumers Union calling it "a symbolic reminder that the Telecommunications Act of 1996 has failed to produce the vigorous competition that was promised.
"For most consumers, the communications market is rapidly deteriorating into a duopoly dominated by two firms because of the failure of new entrants to gain a foothold in the market." said Gene Kimmelman, Senior Director of Public Policy and Advocacy for Consumers Union.
Such an acquisition would have both symbolic and competitive significance, as SBC is one of the Baby Bells spawned by the breakup of AT&T; in 1984.
Based in San Antonio, Texas, SBC Communications is the second-largest US local phone carrier, after Verizon Communications. It has 52 million local- phone customers in 13 states, with the largest concentrations in California, Texas and Illinois. It also has over 20 million customers for long distance and over 5 million DSL subscribers.
In conjunction with BellSouth, SBC owns Cingular Wireless, the country's largest wireless carrier with nearly 50 million subscribers. Cingular has already bought a piece of AT&T;, acquiring its wireless business last year for $41 billion.
The telecommunications market has evolved far beyond the simple fixed-wire home line that AT&T; provided for decades. Telecom companies now include local phone companies, long-distance carriers, wireless providers, cable television firms, internet companies and broadband carriers. All compete to offer an array of services over various pipelines to the home and office, such as phone lines and cable TV connections.
"Today, consumers face higher prices and lower quality (because of) the incredible level of consolidation in the phone industry," said Susanna Montezemolo, policy analyst at Consumers Union in Washington, DC. "Now, we're putting Humpty Dumpty back together again without regulation."
Over the past 14 years, AT&T; has been dramatically diminished in scope as it has ventured into computer-making, wireless, telecom equipment and cable. With its profits plummeting, last year AT&T; cut 20% of its workforce. Although AT&T; remains the largest US long-distance carrier with 30 million customers, recently it turned its back on residential market to concentrate on business telecom. "Grandma's phone company is no longer even selling telephone service to grandma," said David Willis, a telecom analyst in Texas, with research firm Meta Group. "AT&T; abandoned the residential business to groom itself to be acquired."
Mark Cooper, Director of Research at the Consumer Federation of America warned recently that if the deal goes through, consumers will be left with only two choices, "a single cable company that dominates video and high speed internet or a regional Bell operating company that dominates local, long distance and wireless telecommunications. He maintains that "two companies are not enough to provide serious price competition or...incentives to innovate." Furthermore, Cooper says, "the Bells and cable companies have become fixated on putting together large bundles of services that only the richest 20% of Americans can afford." It is this segment of American households - with an average income of $60,000 per year - "that currently subscribe to the broadband internet, cable/satellite, and wireless." For the remaining 80 percent of American households, "the big bundles require a substantial increase in expenditures and for half of American households, the bundles require a doubling of monthly costs."
Fortunately, a merger of this scope still requires regulatory approval - but consumer advocates need citizen support if they are to successfully oppose it. SBC tried to acquire AT&T; in 1997 but was rebuffed by regulators.
The CPUC will hold public meetings to hear comments on the proposed merger of SBC Communications and AT&T; Corporation in Oakland on Tuesday, June 14 at 2PM and again at 7PM at the Elihu Harris State Building at 1515 Clay Street. On Wednesday, June 15, hearings will be held at 2 and 7PM at the Clarion Hotel Mansion Inn - Terrace Room, 700 16th Street in Sacramento.
If you can't attend the public hearings on the SBC-AT&T; merger and you are concerned, you may email your comments to [email protected] or write to the CPUC Public Advisor's Office at CPUC Public Advisor, 505 Van Ness Ave., Room 2103, San Francisco, CA. 94102.

Sandy Leon Vest
Renewable Energy Advocate
415 868-1340
[email protected]

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