AT&T/BellSouth Merger a Necessary Step for Industry Transition

Published March 7, 2006

(Chicago, IL – March 7, 2006) On Sunday, AT&T and BellSouth announced a $67 billion merger agreement. The announcement has been met with considerable controversy as critics demand the Justice Department block the deal over claims it would lead to higher prices for consumers.

In the statement below, Steven Titch, senior fellow for IT and telecom policy at The Heartland Institute, allays those fears, arguing the deal will benefit both the industry and consumers. Titch can be reached for further comment via email at [email protected] or by calling the public affairs department at The Heartland Institute at 312/377-4000.

“The proposed merger of AT&T and BellSouth is another step in the necessary transition of the U.S. telecommunications industry from voice toward integrated broadband and video services. Consumers will benefit in many ways.

“The cost of last-mile broadband access–the most expensive part of the broadband network–will continue to drop because AT&T will be able to take advantage of greater economies of scale. The same holds true for the cost and quality of content. A combined AT&T-BellSouth will be in a better position to give consumers nationwide what they want: a functional bundle of basic and premium broadband services and applications that work across voice, video, and wireless platforms.

“Still, news of the merger has brought the same predictions from opponents who warn of higher prices and less competition. They appear not to have noticed–or do not wish to acknowledge–that despite more than a decade of carrier consolidation, broadband prices continue to drop and competitive alternatives flourish.

“Comcast, Covad, EarthLink, Google, Sprint Nextel, and Vonage are just a cross-section of solid companies amassing market share at the expense of the divested Baby Bells. In this environment it’s difficult to make the case that even a merged AT&T and BellSouth can somehow drive out all competition. The broadband supply chain has become too large.

“The day when regulators could justify arbitrary barriers on service providers based on geography or history is long gone. Those barriers, not consolidation, slow deployment and keep prices high. The Department of Justice, Federal Communications Commission, and state regulators should approve this merger because it is the twenty-first century market’s answer to what consumer want and need in bundled broadband applications.”

Steven Titch ([email protected]) is senior fellow – IT and telecom policy for The Heartland Institute, a national nonprofit organization based in Chicago. Among other publications, Heartland publishes IT&T News (, a monthly newsletter addressing technology and telecommunications policy issues. For more information, call Michael Van Winkle, media affairs assistant, 312/377-4000, or email him at [email protected].