SBC Trying to Buy AT&T?

NY Times: SBC Said to Be in Talks to Buy AT&T. A deal, if reached, would be the final chapter in the 120-year history of AT&T, the first technological giant of the modern age and the original model for telecommunications companies worldwide. A deal would be a reunion of sorts, putting back together some of the largest pieces of the Ma Bell telephone monopoly, which was broken up in 1984.

The AT&T of today is a weak shadow of its former self. SBC is one of the powerhouses among the regional monopolies.

This deal, by itself, wouldn't do much to disrupt the marketplace immediately. But it's a harbinger of trouble.

The worry is on the data side. Voice is already moving into the data sphere as VoIP, and will someday be seen as a small add-on to data.

SBC is one of the most arrogant of the "Baby" (!) Bells. But all of them, assisted by an FCC that has been determined to let the phone and cable duopoly control data access, are moving to throttle the most important competitive market of the future -- broadband -- by insisting on absolute control over the wires they've installed based on government-granted monopolies. This local duopoly makes other kinds of consolidation look tame.

Someday, wireless broadband could help. But competing wireless systems have to connect to backbones and their local nodes. If the Bells can take over the companies that provide such data access, they can be anticompetitive in new ways.

I predict a slew of deals like this, where the regional Bells take over the long-distance and backbone companies, with little regulatory concern. Then we'll be even deeper in the soup.

Comments

[Cranky Observer]

Well, I don't see how the consolidations can be prevented. The backbone carriers (AT&T, MCI) depended on their long-distance revenue to support their other operations, and long-distance will be gone in 5 more years. So they have to merge with someone.

From the consumer's point of view, it would be far better if AT&T merged with BellSouth or British Telecom than SBC.

Cranky

[Frankke Potential]

If the Democratic minority starts to work with the Republican dominated FCC, instead of villifying it, that would be a start. Michael Powell's resignation is just such an opportunity. Will the Democrats take it, or just double up their demogaguery?

They're not off to a very good start w/r/t the forthcoming Attorney General of the United States, Alberto Gonzoles. Not a single question from a major Democrat on the Judiciary Commmittee regarding antitrust enforcement or laws impacting media. It was just torture, torture, torture, even as their staffs penned another round of fundraising letters for the Howard Dean mailing list.

Some leading Republicans have expressed concern, hesitation, and even overt revolt with the Bush Administration, over the issue of media consolidation. Can the Democrats stomach some bipartisanship, and engage on the topic of this potential merger?

[Charlie Prael]

Yes they can be anti-competitive. There are, however, ways to fight back. My mom owns a ranch in NM. Care to guess where our first interface with the local phone company is? At the VOIP PBX in Albuquerque. Wireless ISP, connecting to AT&SF dark fiber in town, with VOIP phone service. And it's ~2 orders of magnitude cheaper than running a phone line out there ($120,000 vs. $200). We're trying to figure at the moment whether we can take go snag a significant chunk of rural NM's business this way.

[Dan Gillmor]

Charlie, I wish you well on this. But let's hope the Bells don't control the dark fiber, too.

[Charlie Prael]

Dan-- At the moment, no. Note that the railroads laid a LOT of dark fiber during the 90s (all those nice right-of-ways), and that Google is also quietly getting into the infrastructure game.

You might also note that our structural model lets us do most of a state on a relatively small number of interconnects - so we can be pretty picky about who we sign up with. Mostly we'll be running our own 100Mbit trunks. At $400/end for a ~8 mile shot, the economics are pretty brutal.

[seaan]

I'm strongly encouraged to see activity of the type Charlie mentions. But that brings up another example of how the duopoly of cable and baby-bell impedes competition.

I had a friend who did something similar in the Santa Cruz Mountains, and here he found that Comcast (the local cable company) would not take his advertisements because he was a potential competitor (just potential at the time, because they did not have broadband in Santa Cruz at that point).

[Dean Landsman]

Do not let this potential sale fool you. AT&T is in the telecommunications business, and in it to stay, for the long run. No other company has devoted as much R&D to WiMax as AT&T, nor is any potential competitor as well suited to dominate the area. AT&T has the poles, the infrastructure, and the brain power to emerge as the leader when WiMax begins introduction into the mass market.

AT&T is also the place where all the research, internal lab work and dedication to improved technologies are fostered.

From the consumer/busines side it has always been quite easy to snipe at the monolith, and with good reason most of the time. What must be taken into account, though, most importantly, is that since the Armstrong debacle (trying to be all things to all people, through a strategy of acquisition as opposed to the time-honored AT&T tradition of internal development and roll-out) the company has been shedding all the old paradigm, old tech operating arenas and has had a major company-wide focus on WiMax.

Yes, there are concerns over SBC owning the AT&T LD business. And yes, it seems that either Verizon or SBC seem to be on a path that would ultimately result in them looking as much like the old AT&T monolith model as is possible under the new rules. But be careful not to misinterpret these moves by the giant. It will most likely return to dominance, and take a much healthier, solution- and user-oriented position as it morphs into a new era.

[Dean Landsman]

One additional clarification: my understanding was that SBC was looking to purchase only the LD Division of AT&T, not the whole shebang.

Frankly, if it is a whole shebang acquisition, then the future the AT&T tremendous intitiative into WiMax might be in jeopardy. The Baby Bells have been uniform in their approach to newtech: deny it, declare oldtech to be better, lobby and politic to prevent newtech from improving or impinging upon Baby Bell business areas, and then buy up any worthy [competing] newtech companies to either kill them or to totally own the sector. This enables the ultimate Bay Bell focus: to bill customers at the highest possible rates.

The Baby Bells all want to grow up and be what AT&T once was: a monopoly able to set pricing and to never have to worry about competition.

[oldte]

Frankly, if it is a whole shebang acquisition, then the future the AT&T tremendous intitiative into WiMax might be in jeopardy. The Baby Bells have been uniform in their approach to newtech: deny it, declare oldtech to be better, lobby and politic to prevent newtech from improving or impinging upon Baby Bell business areas, and then buy up any worthy [competing] newtech companies to either kill them or to totally own the sector. This enables the ultimate Bay Bell focus: to bill customers at the highest possible rates.

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