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The FCC Punts Again

Steven Titch
November 5, 2006, 2:04pm

The Federal Communications Commission again delayed approval of the AT&T-BellSouth merger. Republican and Democratic commissioners remain deadlocked at 2-2. The fifth commissioner, a Republican, has recused himself from the vote because of past lobbying work on behalf of AT&T. Given that the Department of Justice and the nine state public service commissions in BellSouth's region have all approved the merger without conditions, opponents of the merger appear to have found in this stalemate an opportunity to drag out the merger process for no other reason than that they can. This is unfortunate because together, AT&T and BellSouth would be better positioned as a broadband competitor, and its customers, current and prospective, would be that much better off. Opponents remain hung up on the idea that the former Bell companies that are re-forming their old monopoly. But the AT&T that was broken up by 1984 divestiture agreement is not the same company today. Nor is it operating in the same environment. True, AT&T once monopolized voice service through a government-sanctioned monopoly. That was before the emergence of the Internet, cell phones, cable telephony and WiFi. This latest FCC objection seems rooted in a narrow, flawed report that merger opponents submitted last week. I'm neither and engineer nor an academic, but I have spent a good part of my career translating thoughts and ideas from both circles into readable prose. Frankly, the paper submitted by a team led by Sumit K. Majumdar, Professor of Technology Strategy at the School of Management of the University of Texas at Dallas, is gobbledygook. When I first read it I thought no one at the FCC would take it seriously. The 22-page paper, which purports to be a scholarly analysis on the state of U.S. telecom competition, focuses completely on local exchange services, arbitrarily deeming them the most important service the companies offer. It ignores the effect of the Internet and wireless on traditional voice service, and the vibrant market for integrated phone, high-speed Internet and cable services. The terms "Internet" and "cable TV" do not even appear in the 22-page document. It even has the audacity to cut off its competition data at 2001–the year Vonage was founded and commercialized voice over Internet calling and wireline revenues began their steady year-to-year decline. The 2001 cutoff also allows the authors to get away with stating that network investment has declined following consolidaton. Since then, however, Verizon has begin its $18-bilion fiber-to-the-home deployment as AT&T has moved ahead with its $4-billion Project Lightspeed. If all I did was step outside my house, look in all directions, I'd conclude the world is flat. The authors used a similar approach. Stepped off campus long enough to note local phone service providers are consolidating, then concluded that AT&T-BellSouth must then be reconstructing a monopoly. But they fail to grasp the obvious. Local exchange services are declining in favor of wireless and broadband. Consumers want integrated broadband services. That market is teeming with national companies--Comcast, Cox, Time Warner, EarthLink, Sprint and Verizon–just to name six. Add Google, Yahoo and eBay, all of which are developing telecom businesses from a Web perspective, and it becomes more absurd to insist the U.S. telecom industry remain geographically divided.


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