November 1st, 2005
With telco mergers approved, greed factor can't be discounted
I’ve been processing my thoughts this morning on what happens next in light of the Federal Communications Commission’s unanimous approval yesterday of the Verizon-MCI and SBC-AT&T mergers.
My opinion is a conflicted one. From the standpoint of telecommunications infrastructure, these deals work.
AT&T’s able business services infrastructure meshes well with SBC’s strong residential services offerings, and MCI’s Internet infrastructure and portfolio of government contracts is a nice addition to Verizon’s services suites. In fact, back when Qwest buying MCI looked like it might happen, I argued for MCI to sell to Verizon instead.
But I am troubled. Maybe I have an institutional resistance to "fewer and bigger." Sure, I know that the Department of Justice is making SBC, AT&T, MCI and Verizon divest their proprietary fiber connections to some 700 buildings in a total of 19 cities. That’s nice, but what are 700 buildings in the overall scheme of things.
My problem is informed by commercial, regulatory and political concerns. Yesterday’s quote from SBC CEO Ed Whitacre strongly implying that he would like to charge carriage fees to bandwidth-consuming VoIP services as well as IM-delivered VoIP is more than disturbing. That’s why Vonage, who will not shrink from a fight, recently opened a Washington, D.C. office staffed by three lobbyists ready to argue its case against attempts such as the one Whitacre is talking openly about making.
Usually, when large semi monopolies seek overarching power over markets, they do it via quiet persuasion. Low-key filings, fine print bill stuffers, quiet lobbying. Yet Whitacre is being anything if not brash. He’s essentially telling everyone within shouting or reading distance that we, SBC, ought to be able to do anything we want.
Perhaps Whitacre’s brashness is a function of his personality. Quieter individuals just as dedicated to "enhancing shareholder value" practice this art with more stealth and perhaps just a bit more tact. But Whitacre - whose arguments are not totally without merit- is being brash even for someone of his station and responsibility.
I hope what we don’t have here is a repetition of the mass institutional arrogance of the cable television industry. I covered the cable beat for more than a decade, and remember the outcry from the cable industry when its inflationary, profiteering and constant series of rate hikes were regulated by the 1992 Cable Act. Then, when the political party more sympathetic to cable’s rate structure arguments took over Congress in 1994, it was less than two years before the 1996 Telecommunications Act swept those profiteering cost safeguards aside.
Have you checked your cable bill lately?
During the period in question, cable experienced mass consolidation, with purchases financed by increased subscriber fees blessed by a regulatory infrastructure once again rendered complacent, sympathetic, powerless- all of the above, actually. And you had cable titans like John Malone- then CEO of what was then TCI- rejoicing openly at the power they regained over the market.
Malone strut his stuff in 1996. Whitacre is doing the same on the eve of 2006. Meet the new greed. Same as the old greed.
Russell Shaw is an enterprise computing journalist, analyst and author based in Portland, Oregon. See his full profile and disclosure of his industry affiliations.
