The
one bright spot was long distance phone rates, which have fallen since 1996,
largely because of competition between Sprint, MCI WorldCom and
AT&T (as
well as a host of smaller, niche long-distance carriers). And there was hope
for cheaper local rates, as the Supreme Court recently upheld the power of
the FCC to rule over local phone competition.
But consumer advocates fear that the planned
WorldCom/Sprint merger could send long distance rates back on an upward
spiral. Commenting on final approval for the merger, FCC Chairman William
Kennard has warned that WorldCom/Sprint ""will bear a burden to show
how consumers would be better off."
What has led to
the mergers?
The merger occurs as the telecommunications
battlefield has shifted from local, long-distance and cable TV-only delivery
to "broadband" communications of local, long-distance, data, wireless, cable
TV, Internet access and anything else that can be crammed into your home,
car or briefcase. That is what has led to the many company mergers.
Faced with this new business environment, Kennard
has been trying to apply and interpret laws and regs that were
generally based on regional concepts of telecom and cable
competition.
"We are
standing at the threshold of a new century, a century that promises to be as
revolutionary in the technology that affects our daily lives and the future
of our country as the inventions that so profoundly shaped the past 100
years," Kennard said. "As we enter this digital future, we must create a
competitive market in which innovation is fostered and the technologies
that are reshaping our world can continue to be improved." Kennard and the FCC seem willing to let mergers
happen, hoping that competition won't be lost.
When the FCC cleared the way for the AT&T
acquisition of MediaOne Group (UMG) on Oct. 8, the nation's largest
commonly owned cable network was created. At the time, Kennard said: "If the
companies want to consolidate with each other just to increase their
dominance in the core cable business, that would be troublesome for
competition. . . . But if cable companies want to enter into arrangements
with each other to pursue new competitive ventures, like local phone service
and high-speed Internet access, that's no threat to competition. Indeed, it
would be a boon for competition."
Arguments that don't
fly
The
FCC apparently did not buy the arguments of
consumer groups. In August, Consumers Union, the Consumer Federation of
America and the Media Access Project filed requests before the FCC and the
Justice Department's Antitrust Division to block the AT&T/MediaOne
merger deal. The groups also sent a letter to the FTC arguing that the "AT&T/MediaOne deal involves such massive
concentration of ownership . . that failure to assert antitrust principles
to stop this merger will result in inflated cable and broadband Internet
service rates for consumers and thwart the development of vibrant
competition in these markets."
The result from all this is that regulators have endorsed the concept of a
small number of large telecommunications companies that can provide all
broadband services.
While this could lead to you getting just one (large) bill for your local
phone, long-distance phone, cable or wireless TV, wireless phone and
Internet access, whether the price you pay for these services will go up
because of the mergers is an open question.
Kennard and the FCC are betting that, as with long-distance phone service,
only a few strong companies are needed for the competition necessary to keep
prices down. What has yet to be determined is if the FCC thinks an
independent Sprint -- or some vestige of it -- needs to be one of those
competitors.
