Policy Opportunism Dogs SBC-AT&T Merger

Published July 1, 2005

Given the level of outcry over the United States’ global rank of 13th in terms of overall broadband penetration, you would think SBC’s move to acquire troubled AT&T would be greeted as a positive step. Unfortunately, a number of interests are attempting to slow SBC down or gain some advantage.

The Federal Communications Commission (FCC) has heard from a number of different constituencies about the proposed marriage. It seems that given the opportunity, almost every interest group will ask for a kickback in return for “official” blessing of the merger.

But the FCC’s goal should be to evaluate whether the merger is congruent with the Telecommunications Act and other statutory rules, not to hand out goodies to those that come asking.

Those petitioning the commission for restraints on SBC represent competitors, special interests, and state government bodies. It’s a classic case of concentrated interests working to obtain benefits at the expense of broader, more dispersed interests–namely those of the average American consumer.

Predictably, SBC competitors such as ACN Communications, RCN Telecom Services, and U.S. Telepacific Corp. want the FCC to require promotional discounts on all loops and subloops for at least three years and unbundled access to parts of SBC’s network, including any new fiber optic networks.

Price controls and forced access to communication networks have, unfortunately, been staples of telecommunications law since 1996. The time has come to break free of this dysfunctional system. When government forces companies to share their resources with competitors, investment declines and everyone suffers. There is no good reason why the United States should be 13th in the world in broadband deployment. But it is, thanks in large part to the nation’s restrictive telecommunications laws.

Concessions, Concessions

Other interest groups demand concessions of a different kind. While the Consumer Federation of America (CFA) is asking for the SBC/AT&T and Verizon/MCI mergers to be considered together, the National Association of State Utility Consumer Advocates (NASUCA) wants SBC/AT&T to be banned from lobbying municipalities on the issue of broadband networks. Apparently, NASUCA wants to cut out its competition by asking the government for favors.

NASUCA is demanding the merged company provide broadband capabilities ubiquitously throughout the SBC territory within five years. NASUCA also wants the FCC to require that the benefits of merger synergies flow back to consumers, stipulating that by the end of 2008, the merger must be shown to have produced $2 billion in savings per year.

These demands will shock anyone not smitten with the idea of central planning and government takeover of private industry. That aside, the apparatus needed to make these demands a reality would be prohibitively costly and perhaps impossible to carry out.

NASUCA does push for some conditions that are at least possible, such as the unbundling of DSL service from dial-tone. But just because something is possible does not mean it is desirable. True, it is annoying to the consumer to be required to buy local phone service just to get a DSL line, but that is a reason for buying a cable, wireless, or satellite broadband connection, not to increase government involvement in the marketplace.

Government bodies make up the third group demanding special favors as a condition of the SBC/AT&T merger. The state of Alaska and Texas Office of Public Utility Counsel (OPUC) are two that have filed petitions. While Alaska seeks to hold certain regulatory conditions in place, Texas wants big changes. Perhaps most disturbingly, the Texas OPUC is asking the FCC to make SBC subject to the California Bill of Rights–a set of regulations recently suspended by the California Public Utilities Commission because they would be extremely costly.

That’s not a direction the FCC should endorse if it wants to help make America a leader in broadband access. What is needed is a clear look at the laws and a willingness to let the market benefit Americans through competition.

True competition will occur only if government restrains itself from imposing rules that favor some competitors over others. The important issue now is to avoid delaying the merger in the name of social engineering.

When government officials are asked to examine the public interest in large merger contexts, they sometimes start to think of what they could extract in return for their approval. But that mindset is unhelpful. The best way for a viable communications business to help communities is for it to thrive and create jobs, revenue, and future products. And that happens most successfully in a free and open market, not an environment cluttered and constrained by regulators and special interests.

Although the SBC/AT&T merger might seem like a move towards fewer players in the telecom space, the competition it creates in the larger communications industry–cable, wireless, and satellite–is good for consumers and the national interest. The new company will have more resources to innovate and serve its customers, individuals and businesses alike.


Sonia Arrison ([email protected]) is director of technology studies at the Pacific Research Institute. Reproduced with permission of TechNewsWorld and ECT News Network. Copyright ¬© 2005 all rights reserved.