Verizon-Alltel Deal May Face Different Scrutiny
There's a major unknown factor in Verizon's proposed $28.1 billion acquisition of Alltel: antitrust regulations. If approved by the Washington regulators, the deal would give Verizon Wireless and AT&T control of 58 percent of the U.S. mobile market. That would be no problem for the Bush administration's antitrust officials, such as they are, who have rubber-stamped the dizzying consolidation of telecommunications companies by approving the AT&T-BellSouth, Verizon-SBC and Verizon-MCI mergers. The end result of those mergers has been to give fewer companies greater control over consumer choices. And, it should be added, those mergers have done nothing to speed the nation's broadband rollout. In fact, according to the OECD, America has fallen even further behind in the global broadband race since those mergers. By the time the Verizon Wireless-Alltel proposal hits Washington, though, there will be a new president and new people in charge of the regulatory agencies. Either John McCain or Barack Obama is likely to look harder at mergers than the Bush administration, which wouldn't be hard to do. "With the 2008 elections, there is going to be a tidal wave of new regulations and a tremendous amount of change, whether it's Obama or McCain, in the areas we are focused on, including financial services, health care, energy and commerce," Teddy Downey of Potomac Research recently told the Washington Post. Obama told reporters in May, "If you talk to members of the antitrust division of the Justice Department, the career folks who came in before George Bush took office, there's a sense that there's not a real interest in antitrust prosecutions." McCain's shifting positions are often difficult to nail down, but he voted against the 1996 Telecom Reform Act on the grounds that it didn't go far enough. Nevertheless, McCain remains an ardent supporter of free markets and regulators with a light touch. "I believe that we must promote competition and reduce regulation in order to secure lower prices and higher-quality services for consumers," McCain said earlier in 2008. Neither of which is likely to happen if the new administration green-lights the Verizon Wireless-Alltel deal. "If the deal goes through, two companies, Verizon and AT&T, will control about 150 million of the 260 million wireless customers in the United States. Verizon will have about 80 million alone," said Gigi Sohn of Public Knowledge. "With Sprint in a weakened condition, this deal will speed the unfortunate trend of giving consumers fewer, rather than more, choices in telecommunications services, while giving a few companies more control over the lives of consumers." Ben Scott of Free Press weighed in with, "The deal raises serious concerns for consumers. The wireless industry is rapidly being taken over by the same companies that dominate the broadband and DSL marketplace." The proposed merger, he added, "appears to hasten this consolidation. We urge regulators to give this merger careful scrutiny with a steady eye toward promoting the competitive wireless marketplace consumers demand." Scott, as usual, has a point. The Bush administration has done its best to undermine more than 20 years of effort to introduce competition in the telecom market, all in the name of free markets. Under this view, if consumers gain it's only a collateral effect. Let's hope a new administration -- whether McCain or Obama -- will have a more enlightened view that goes beyond shareholder interests trumping consumers. |
Comments (6)
It will be good to see the current climate go away. The only regulation that the Bush administration appears to believe in is the regulation of people. Remember how the FDA cracked down on people going to Canada for medications, due to concerns about the quality of the ingredients. Then we find out that American drug companies import ingredients without even testing to assure the ingredients are what is claimed.
With a few more years of a "W" clone I expect to see one or two phone companies. If the leadership of the FCC doesn't change, I expect to see more consolidation in broadcast news and newspapers. All of these consolidations will have the effect of controlling what is reported and how we receive it. Perhaps it is a good thing that Time Warner AOL failed. Control of the source and delivery medium for information could reduct the amount of information arriving for review.
Whoever the next president is, he should move to replace the current crop of regulation appointees with competent people to restore confidence in the system.
Posted by Chuck | June 6, 2008 3:04 PM
I am normally a firm believer in unregulated free market providing the best outcome for consumers. But the Telecom industry is skewed by decades of government regulation to limit competition on the pretense of allowing incumbent providers to have a regulated monopoly to recoup their build out costs to rural areas for phone services. The tariff regulations prevented monopolistic charges of course. But the incumbent telecoms now have an unfair advantage in a free market system because they already have the high customer count and maintain control of the copper telecom network reaching out to all homes and businesses.
And part of the reason broadband has not been rolled out by the incumbents is most of their profits for the last few years have been funnelled into building their wireless networks...and then the wireless companies diverged from the wired provider networks so they do not have to be burdened with expensive updates to an antiquated analog system. So the same company names are now the large providers in wireless services too.
With less choices for Telecom services, the pricing for those services will rise. And it is too difficult and too expensive to just start up a competitive service for wired or wireless telecom services from scratch. A network has to be in place before services can be provided.
Government regulation built this monster and regulations will have to be instituted to dismantle it as well...or at least create a system/environment that allows it to be competed with.
Posted by Shawn | June 9, 2008 11:48 AM
One correction: you mention a "Verizon-SBC" merger -- SBC didn't merge with Verizon. SBC merged with/took over AT&T (after acquiring PacBell & Ameritech in the '90s), and the new AT&T-nee-SBC later took over BellSouth.
Posted by Bob | June 9, 2008 2:10 PM
In 1984, AT&T was broken up to encourage competition. 24 years later, it looks like we are on course for the formation, through acquisition, of a single service provider again. Are our rates lower, products more diverse, and customer service improved (when was the last time you could actually get through to a 'live' service agent)? And it's no different with the cable companies and utilities, who enjoy monopolies in most communities and whose rates are outrageous for what they provide (i.e.; Comast's $55+ charge for basic service). Unfortunately, some service industries need regulatory oversight. And we need leaders who recognize that consumers need some protection.
Posted by Steve | June 9, 2008 3:26 PM
I think what we are all forgetting is geography. Look at the Map of the USA and a Map of all the other countries. A very big difference when you compare size in the majority of the cases and variations in terrain. The cost are enormous and thus why rural area continue to suffer with lack of or limited broadband services. Don't forget that a in a lot of the other countries the infrastructures are owned or subsidize by the government. To ensure the customer base is there to offset the cost of supplying equal services to rural/low population areas and other larger cities you need larger comporations running these operations to support these efforts. We have both GSM and CDMA in the US with no network neutrality. We have created a complicated and expesive wireless network on purpose so that there is room for muliple service providers bu they have to have the capital to play in the game. Don't forget we are a capitalist society and everything costs whether we like it or not. Shall we say gas prices. thus associate that with the daily increase in cost to dispatch truck. Wireless is the way but it requires dollars. the technology is still on year cycle in advancement so it is a very capital intense operation while balancing the cost to the enduser.
Posted by Bdub | June 9, 2008 5:00 PM
There are so many errors in this article, it's not even funny. Did you just randomly insert the names of companies as you typed, or did you use actual research?
Posted by Please Edit this Article | June 12, 2008 11:37 AM